Oregon Health Authority OKs St. Charles deal to acquire The Center – but with conditions that will be appealed

BEND, Ore. (KTVZ) – The Oregon Health Authority has reviewed and approved St. Charles Health System’s proposed acquisition and integration with The Center, a group of doctor-owned orthopedic and neurosurgery centers – but with some conditions the hospital group plans to appeal.

The OHA’s Health Care Market Oversight program, created by lawmakers two years ago to review such merger proposals, issued its order Thursday, approving the transaction - with conditions - after studying its impacts across four domains: cost, access, quality and equity.

St. Charles and The Center announced in July they had signed a letter of intent to explore an expanded relationship while also seeking an emergency exemption from the review process, to speed up their integration plans.

But OHA rejected that fast-track path in August, saying there was no immediate threat of insolvency and that St. Charles hadn’t provided firm proof that existing staff would be brought aboard at competitive salaries.

Regarding one condition included in its order after its preliminary review, OHA said: “It will be important that St. Charles does not increase patients’ costs by imposing new facility fees for outpatient services rendered by The Center providers.”

OHA noted in its findings that The Center patients are not charged any facility fees for services rendered by its providers in an outpatient setting. Meanwhile, it said, “St. Charles receives higher commercial payments for many of the same outpatient procedures as compared to The Center, with some payments more than five times as much as The Center.”

So OHA has directed that for 10 years after the acquisition, “St. Charles shall not charge facility fees for any services rendered by former The Center health care providers for which no facility fees are currently applied.”

The OHA reviewers also called it “unlikely” that the deal would hurt access to services now provided by The Center. However, they added that “given the dominant market share of the entities, it will be important that providers can decide the appropriate setting when treating a patient, and that providers can maintain relationships with other hospitals and facilities." And so, the order included several conditions to ensure such is the case for at least five years.

In another arena, related to quality of care, OHA found that the deal could actually increase quality in the region, noting that St. Charles performs better than The Center in areas such as screening for fall risk and tobacco cessation, and providing patients with access to health information.

As for equity, OHA said the acquisition actually “may increase the number of patients receiving charity care, which would reduce costs for patients who earn up to four times the poverty level.”

The health agency also directed keeping various sets of records and said it will follow up on the St. Charles-The Center deal’s impacts with reviews one, two and five years after its completion, assessing whether the parties have kept their stated commitments.

St. Charles Health System provided this statement to NewsChannel 21 on Saturday, with its reaction to the decision and plans to appeal at least one condition:

"Overall, we view the approval from OHA’s Health Care Market Oversight program as good news, as the integration of The Center and St. Charles is of extreme importance to preserve essential care in our community. 

"We are not, however, in full alignment with all the conditions outlined in the approval. In particular, one provision potentially limits how orthopedic services are delivered to our community for a period of 10 years, which is longer than most transaction conditions we have reviewed, and we believe is unreasonable given the rapidly changing dynamics in health care.  

"We are working through the OHA process for appealing this decision, which requires us to go through a contested case hearing. Regardless of the hearing, the transaction has been approved and we will continue to move forward with The Center team on our integration plans," the hospital system said. 

Willamette Week, which has been tracking the St. Charles-The Center deal, noted in its report Friday that the OHA’s Health Care Market Oversight Program was created by the 2022 Oregon Legislature to review major health care mergers and acquisitions.

It said the Central Oregon deal’s review and approval order “offers some insight into HCMO’s thinking,” as it weighs the “blockbuster merger" of Legacy Health and Oregon Health & Sciences University.

The HCMO report noted that the St. Charles-The Center deal would create a “vertically integrated system,” which can lead to higher prices without improving care, Willamette Week reported. “So HCMO is restricting St. Charles from engaging in certain common anti-competitive tactics in the health care industry, like requiring the newly acquired doctors to use St. Charles’ facilities.”