The Corvallis area’s dominant hospital chain is looking to absorb a small rural hospital and clinic group in a move both organizations say could strengthen their offerings.
The nonprofit Corvallis-based Samaritan Health Services chain and the nonprofit Santiam Hospital in Stayton announced the potential deal on Wednesday.
The 40-bed Santiam hospital is one of the few remaining independent nonprofit hospitals in the state. Over the years, larger multi-hospital chains have absorbed smaller independent and rural hospitals that have struggled to break even or raise the large sums needed for technology and building upgrades.
Samaritan, with five hospitals and 10 standalone clinics, is the major health care provider in Linn, Benton and Lincoln counties, its market stretching from the Willamette Valley to the Oregon Coast. Santiam, with its hospital and three standalone clinics, serves eastern Linn and eastern Marion counties.
The move “positions us well to strengthen services across the region,” said Doug Boysen, Samaritan’s CEO, in a news release. “The health care industry is evolving,” he said, adding that the merger will help both organizations “remain sustainable, strong institutions.”
The organizations have signed a non-binding letter of intent and are exploring the deal. If they proceed, they will need to submit the move for review by Oregon’s Health Care Market Oversight program. The state’s two-year-old program evaluates major health care mergers and other deals to ensure they don’t hurt health services.
Both sides said they aim to keep existing staff and clinicians. Samaritan’s and Santiam’s audited financial reports show that neither group is in financial straits, but also that neither is a financial powerhouse.
The Santiam hospital was founded in 1953. The facility and clinics now have a staff of about 600, including 70 doctors and other clinicians.
The organization, which is governed by its own board of directors, typically breaks even or makes a small profit or loss every year, its financial filings show.
In 2023 it recorded an operating loss of $6.3 million, according to a Santiam spokesperson. In 2022, it essentially broke even, with an operating profit of $83,700 on revenues of $97 million. The previous year it reported an operating profit of $8 million, plus a one-time boost from a $5 million federal Payroll Protection Program loan that the government forgave, according to the filings.
But while hospitals typically build reserves to invest in facility upgrades and new technology, Santiam is not wealthy. Its main assets are cash and investments of about $28 million, plus buildings valued at $35 million, its financial audit shows. The hospital also has a $22 million mortgage. The group’s net worth – all assets minus all liabilities – stands at $50 million.
Samaritan, meanwhile, has more than 6,000 employees, including 620 clinicians, and also offers health insurance plans. It is governed by its own board of directors.
Samaritan typically makes only a small annual profit or loss, or breaks even each year.
For the first quarter of this year, it reported an operating loss of $3 million on operating revenues of $446 million. In 2023, it recorded a loss of $5 million on revenues of $1.6 billion.
Most nonprofit hospital systems want their annual revenues to exceed expenses by at least several percentage points, so they can accumulate reserves that will backstop them through hard times and that also improve their financial profile, so they can borrow on favorable terms for capital projects.
Samaritan over the years has accumulated sizable assets.
Filings show its main assets include $450 million in cash, and short- and long-term investments, plus buildings valued at $351 million. The system’s main liability is long-term debt at $179 million. The system’s net worth is $547 million.
The organizations’ announcement of the merger said it would “strengthen both organizations through increased access to services.”
