Portland’s Legacy Health and OHSU sign merger agreement

PORTLAND, Ore. (KTVZ/KGW) — Legacy Health and Oregon Health and Science University announced Thursday that they've signed a binding agreement to move forward with a planned merger that will combine two of Oregon's biggest health care systems, KGW reported. The new company will be called OHSU Health.

The two companies first announced plans for the merger and signed a letter of intent last summer, but the deal was still non-binding until Thursday's agreement, announced in a news release from OHSU.

"Our agreement with OHSU is an important milestone toward creating a stronger health system better capable of delivering for our patients, our people and our communities," Legacy Health Board Chair Charles Wilhoite said in a statement. "Following many months of thoughtful collaboration between our organizations, we believe this is the right next step to create significant opportunities to improve the health of our region for many years to come."

The combined system will include 12 hospitals, more than 100 other locations and about 30,000 employees, according to the OHSU news release. It will be the largest employer in the Portland metro area, according to the Portland Business Journal. OHSU currently ranks third behind Providence Health & Services and Intel, with Nike in fourth and Legacy in fifth.

The merger is structured so that OHSU is essentially absorbing Legacy; a summary of the terms of the deal posted to OHSU's website states that OHSU will be the sole corporate parent of the combined system and that Legacy Health will "become a wholly owned subsidiary of OHSU." Legacy facilities will generally retain their current names but with the word "Legacy" replaced by "OHSU" in the title, e.g. OHSU Good Samaritan Medical Center.

The combined company will be reorganized into two divisions: the "Portland Division" consisting of OHSU's main hospital, Doernbecher Children's Hospital, Legacy Emanuel, Legacy Good Samaritan, Randall Children's and the Unity Center for Behavioral Health; and the "Regional and Ambulatory Division" consisting of Adventist Health, the Hillsboro Medical Center and the Legacy Meridian Park, Legacy Mount Hood, Legacy Salmon Creek and Legacy Silverton medical centers.

The news release says that an independent "Legacy community foundation" will be spun off and receive funds equal to Legacy's cash minus debt and a "negotiated withhold," and the foundation will use the money to make health care grants. That amount is estimated to be about $350 million, according to the summary.

OHSU will also commit about $1 billion over 10 years to make "needed investments in care infrastructure" across the region serviced by the combined system, according to the news release.

All current OHSU and Legacy employees will become employees of the combined system when the merger takes place. The summary doesn't rule out the possibility of later layoffs, stating only that OHSU would commit to making no workforce reductions for at least the first six months after the deal closes.

A separate Q&A document posted by OHSU notes that the hospital system is "facing financial challenges" but states that it has "built up its capital capacity over the past 15 years in order to be able to borrow the funds" for the deal. The $1 billion capital investment commitment will also be mostly borrowed through bonds, OHSU said.

"Investments in capital are financed differently from the way we pay people; we can't borrow to pay wages," OHSU states in the Q&A. "In the long run, we believe that by serving the people of Oregon better, we'll be in a stronger position and better able to support our people."

The two companies said last year that they hoped the deal would close in 2024, but Thursday's news release didn't mention a target date, saying only that "in the coming months" OHSU and Legacy will submit an application to Oregon's Healthcare Marketplace Oversight Program to begin the state regulatory review process.

The Oregon Nurses Association, which represents about 4,500 nurses and other providers at OHSU and about 1,300 at Legacy, released a statement shortly after the news broke, declaring that its union members would serve a "watchdog" role and calling on the companies to include frontline health care workers in decision-making during the merger process.

"Hospital executives have promised to deliver better patient care, greater efficiency, and expanded services, but we know corporate mergers like this often result in higher costs and lower quality care. To avoid those pitfalls, OHSU and Legacy cannot leave this process exclusively in the hands of C-suite executives," the union wrote.