Legacy Health, the Portland-based hospital system that hopes to merge with OHSU, says a recent report by S&P Global proves its financial picture has brightened.
The ratings agency included Legacy Health in a March 31 roundup of nonprofit health care organizations whose financial picture it rated as “outstanding,” though it downgraded Legacy's bond rating from A+ to A. S&P Global cited Legacy's improving operating results, relatively low debt burden and diversifying revenue sources.
The revised rating came after two years of “workforce labor and other costs of delivering care have increased substantially throughout the healthcare industry,” according to the Legacy announcement. “Despite that economic challenge, Legacy is seeing sustained, improved performance thanks to comprehensive efforts across our organization.”
Legacy and many other hospital systems continue to suffer operating losses, squeezed by rising costs and flat reimbursements by insurance carriers. But Legacy says it has increased its reserves, sold some assets and carries relatively low levels of debt and had 182 days of cash on hand as of Dec. 31, 2024.
Legacy’s five Oregon hospitals in Portland, Silverton, Tualatin and Gresham had a combined operating loss of nearly $53 million last year, while overall revenues fell by almost half from 2023 to 2024, to $1.05 billion.
In December, Legacy cited a report by Moody’s, which rated the system's debt as A1 negative, as showing confidence in Legacy's trajectory. Moody's cited Legacy's Health strong market position and improving operating results as positives, but added "the negative outlook reflects ongoing operational headwinds which may result in operating cashflow margins remaining below 3%-4% through at least fiscal 2026, and debt to cashflow remaining unfavorably high at over 4x."
Oregon Health & Science University’s proposed acquisition of Legacy Health, which would be the largest in Oregon history, is under review by the state. The systems’ application said the merger would help Legacy’s finances, achieve efficiencies and improve care.
But critics say the merged entity would raise costs. Last week, a health care advisory board surprised many by voting unanimously against the proposed merger. One board member said the proposed merger is “too big with too many risks.”
The advisory board’s recommendation that the state disapprove the proposed merger is not binding. Oregon’s health care oversight office could issue its findings as soon as June.
Said S&P Global: "We believe Legacy's enterprise position could be further strengthened by the potential merger with OHSU; although, we will better understand this impact following a definitive agreement."
