A community advisory board found Oregon Health & Science University’s bid to acquire its rival Legacy Health offers little public benefit and raised red flags regarding affordability, access and health equity.
The board, convened by state regulators to help it review the proposed merger, has no decision-making authority, but its decision informs the Oregon Health Authority’s Health Care Market Oversight program, which is expected to rule on the merger this summer.
The community board on Wednesday fleshed out its reasons after it unanimously recommended rejecting the deal last week.
The board concluded that OHSU’s proposal to purchase Legacy fails to prove it won’t hurt the public by driving up costs, cutting competition or risking either institution’s financial stability.
Specifically, the community review board feared that consolidating OHSU and Legacy, which would create the largest health care system in the state, would lead to higher health care costs for consumers. Studies have shown that hospital mergers frequently result in rising health care costs, as larger entities have more reach to extract higher prices from private insurance companies.
“The (community review board) felt that an increase in prices would be detrimental to access, health outcomes, and health equity,” the group said in a draft memo it plans to send to state regulators. “When prices increase, access to care decreases and health outcomes worsen, worsening health equity.”
The board added that consolidating the two health systems would also decrease choices for patients to seek care, as well as reduce job choices for health care workers in the state.
The state also requires health care mergers to show some real benefits, like better health outcomes, more access in underserved areas, lower costs, or progress on health equity.
The review board rejected claims that the merger would expand services in underserved areas or address systemic health disparities, saying the deal lacked specific, actionable plans to improve access or health equity. It also criticized the transaction’s heavy reliance on a proposed new health equity foundation, calling its plans vague and lacking meaningful community input.
Since the two health systems announced plans to join forces, the dominant narrative that has portrayed OHSU as the larger, stronger suitor buying out its financially distressed rival Legacy — and as a better alternative than a for-profit buyer.
Board members, though, questioned whether Legacy finances are dire enough to need a lifeline. As recently as Tuesday, Legacy touted bond rating agency S&P Global Ratings’s affirmation of the health system’s “A” rating with a “stable outlook.”
The board’s recommendation goes to Oregon Health Authority Director Sejal Hathi and the agency’s regulatory body. The board’s decision is just one of the factors that state regulators will take into account when evaluating whether to OK the deal.
As of Wednesday, state regulators were awaiting more materials from OHSU and Legacy. Once those are submitted, regulators will have 87 days left to complete their review. Health officials say they expect to complete their review no later than the end of July.
— Kristine de Leon covers consumer health, retail, small business and data enterprise stories. Reach her at kdeleon@oregonian.com.
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