The demise of a proposed merger between Legacy Health and Oregon Health & Science University is a victory for patients in Washington and Oregon. It also demonstrates the importance of diligent oversight and the difficulties facing the health care system.
The organizations announced in August 2023 that OHSU planned to purchase Legacy, a vast network that operates a hospital in Salmon Creek and several clinics in Clark County. The merger would have brought together 32,000 employees in Southwest Washington and Oregon, consolidating two of the region’s largest health care providers.
On Monday, officials announced that the plan had been terminated. “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 officials wrote in an email to staff members.
During negotiations, administrators and some employee organizations argued that the merger would improve services and reduce costs. They said that if OHSU did not purchase Legacy, the smaller system could be poached by a profit-driven entity that would reduce services. Meanwhile, the American Hospital Association states in a factsheet: “One of the most important tools that hospitals can use to increase access and quality of care and manage risk and financial pressures are mergers and acquisitions. … They provide scale to help reduce costs associated with obtaining medical services and supplies or prescription drugs.”
That view is not universal. Scholars at Brown University and the American Economic Liberties Project opposed the proposal, writing: “Simply put, the math doesn’t add. The parties claim, on the one hand, that Legacy is on the brink of collapse, while promising to deliver more of the services purportedly underlying Legacy’s financial distress: low-margin care for Medicaid patients, such as primary care and behavioral health.”
In reality, Legacy turned a profit of $16.5 million for the fiscal year ending in March 2024, according to reporting from Willamette Week.
Logic dictates that a significant merger would reduce competition, reduce services and reduce employment in the region. The creation of a behemoth also would create additional challenges for health care providers such as Kaiser Permanente and PeaceHealth, which have significant footprints in Clark County. Robust competition is a foundational trait of capitalism, theoretically driving innovation and forcing suppliers to reduce costs to attract customers.
On top of that, the OHSU-Legacy saga highlights the benefits of a strong regulatory state. Oregon has a new Health Care Market Oversight unit to review the health care industry, and part of the process includes a community review board. That board recently recommended against the merger, a decision that is not binding but by law must be considered by the state oversight board.
“Key concerns included increased commercial prices and health care costs that could be passed along directly to consumers, decreased choices for health care (from two systems to one), and workforce issues, including decreasing job choices for health care workers in Oregon,” the review board wrote in its report. That likely contributed to a prudent decision to halt merger plans.
“OHSU and Legacy will remain focused on each health system’s individual strategic objectives,” OHSU officials wrote, “with the goal of remaining well-positioned to continue supporting their people, patients and communities.”
That appears to be the best possible outcome.
