Financial challenges for the health systems and pushback from detractors of the deal contributed to its demise.
One of the largest proposed hospital mergers in Oregon's history is dead.
Oregon Health & Science University (OHSU) and Legacy Health mutually called off their deal to integrate, ending plans to form a 12-hospital health system with over 100 locations and more than 30,000 employees.
Though the organizations didn't provide details in their announcement as to why the transaction was abandoned, it's likely that the decision was influenced by both health systems' financial troubles, as well as by public opposition.
"After careful consideration of the evolving operating environment, the organizations have determined that the best way to meet the needs of the communities they serve is to move forward as individual organizations," OHSU and Legacy Health said in the news release. "OHSU and Legacy will remain focused on each health system’s individual strategic objectives, with the goal of remaining well-positioned to continue supporting their people, patients and communities."
The two sides announced their pursuit of a merger in August 2023, which would have seen OHSU invest $1 billion over 10 years to boost Legacy's infrastructure. A definitive agreement was signed in May 2024 to put the hospital operators on the verge of combining.
However, the deal faced scrutiny from its critics, who stated concerns over the impact of OHSU's increased market power on consumers.
A community advisory board, convened by the Oregon Health Authority, echoed those worries in April by saying that the merger would lead to increased prices and recommended that state regulators deny the deal.
Meanwhile, OHSU, dealing with its own financial headwinds, would have been tasked with supporting Legacy, which has struggled to reach profitability in recent years.
Legacy reported an operating loss of $171.7 million and a net loss of $245.8 million in fiscal year 2023. Through cost containment efforts, the system improved its bottom line in fiscal year 2024, recording operating incoming of $16.5 million and a net gain of $229.8 million.
In OHSU's case, the system cut 500 positions last year and had an operating loss of $71 million through the first nine months of its current fiscal year. As an academic medical center, OHSU is at risk of losing federal funding that the current administration is working to eliminate, in addition to facing potential Medicaid cuts.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
OHSU and Legacy Health have abandoned their merger plans amid financial strain and regulatory scrutiny.
The proposed 12-hospital system faced strong public opposition over potential price hikes and market dominance.
Both health systems will now pursue separate strategic paths to stabilize independently.