Legacy Health Tightens Operations Amid Mounting Financial Strain

With reimbursement shortfalls, rising labor costs, and state-level mandates squeezing margins, CFOs are being forced to balance mission preservation with financial viability.

Legacy Health, a nonprofit, six-hospital system serving Oregon and southwest Washington, announced a series of service reductions and clinic closures. These closures are in response to escalating financial pressures that have pushed the system toward a projected $38 million loss in the current fiscal year.

The health system cited a combination of rising labor and supply costs, stagnant reimbursement rates, and mounting regulatory pressures as key drivers behind its restructuring plan. Many health systems and hospitals are assessing their operational and service footprints as a result of these pressures..

“Like many healthcare organizations, Legacy Health is facing significant financial pressures that require difficult but necessary choices to ensure we can continue delivering high-quality care and fulfilling our mission for years to come,” the health system said in a written statement.

Legacy Health executives said roughly two-thirds of its patients are covered by Medicare or Medicaid, where reimbursement now often fails to cover the full cost of care delivery. That payer mix has left the system particularly vulnerable as inflation drives up clinical and administrative expenses and revenue remains flat.

Adding to this burden are new state-level mandates in Oregon and Washington, including mandated nurse-to-patient ratios and expanded presumptive eligibility for financial assistance, that have increased labor costs and reduced net patient revenue.

Legacy Health executives also pointed to the potential impact of the One Big Beautiful Bill Act (OBBBA) as a looming risk to its financial sustainability and stability.

After what the system described as “a detailed review of services, programs and clinics with the greatest financial challenges,” Legacy Health executives announced the closure of several service lines and urgent care clinics, starting in early 2026. These include the Legacy Devers Eye Institute and the Emanuel Outpatient Neuro-Rehabilitation Program at Emanuel Medical Center, as well as the Legacy Salmon Creek Pain Clinic and the Good Samaritan Cardiac and Pulmonary Rehabilitation Program.

In addition, Legacy-GoHealth Urgent Care will close all Washington locations and two Oregon sites by November 2025, while eight Oregon centers will remain open. Emanuel Outpatient Rehabilitation will also  narrow its scope to trauma and Legacy Medical Group referrals.

The CFO POV

Legacy’s restructuring highlights the financial reality facing many CFOs: The sustainability gap between payer reimbursement and the true cost of care is widening faster than any incremental operational improvements can offset. CFOs must try to strategize with what they have. A few options they can explore are:

• Service line rationalization: CFOs must partner with clinical leaders to identify underperforming programs and assess whether they align with long-term mission and margin goals. Examine each service line’s potential for optimizing efficiency.
   
• Labor efficiency investments: With staffing mandates growing stricter, investments in workforce analytics, automation, and flexible staffing models are critical to balance compliance and cost.
   
• Payer mix management: Health systems with high government payer mixes should intensify their efforts to attract commercially insured patients through strategic service growth as well as ambulatory expansion.
   
• Scenario planning for policy risk: Proactive modeling around potential Medicaid and Medicare reimbursement cuts can guide planning and capital allocation.
   

Legacy Health’s restructuring is a sobering signal to CFOs across the Pacific Northwest and beyond: Maintaining mission-driven care will depend more on financial agility, strategic clarity, and the willingness to make difficult decisions before they become dire.