By MIKE FRANCIS/The Lund Report

A controversial effort by Bay Area Hospital in Coos Bay to turn over its operations to a private equity owned firm has ended with the news that Quorum Health has pulled out.

Hospital leadership announced Friday that the Tennessee-based company will not buy, lease or operate the 172-bed hospital, which employs about 1,000 employees and draws patients from a 150-mile span between Florence and the California border.

The deal announced in December had sparked an uprising in the community, many members of whom objected to out-of-state ownership. The union representing employees launched a high-profile campaign against the move, with the hospital responding with its own information campaign.

Kelly Morgan, Bay Area Hospital’s new interim CEO, was unavailable for comment Friday. In a follow-up statement, a hospital spokesperson said that in the wake of Quorum’s decision, hospital executives have “escalated our turnaround plan.” They are working closely with local partners, the state, and community leaders to “create a local solution for improving the hospital’s financial performance,” she said.

Mike Selvaggio, the political director for United Commercial and Food Workers Local 555, which opposed the deal, said the end of the deal was a tribute to the impact of opposition from the community. The people that would be affected, he said, “collectively shouted, ‘No!’”

After broaching the idea of outside partners more than a year ago and receiving eight proposals, hospital leadership announced that they would move toward an arrangement that would have the Tennessee company operate the financially troubled Coos Bay hospital.

Bay Area executives apparently felt they had little choice. The hospital had approached almost two dozen potential partners since 2016. They discussed a partnership with Vancouver, Wash.,-based PeaceHealth, but PeaceHealth withdrew from the talks, board members were told in a work session two months ago. That left Quorum as the only remaining option for Bay Area, which lost $13.8 million last year on revenue of $250 million.

“We believe partnering with Quorum Health is the right next step,” Brian Moore, Bay Area Hospital’s then-president and CEO, said in December. The arrangement would “help us serve our community for generations to come.”

Quorum’s decision to end pursuit of Bay Area Hospital followed significant leadership changes at the hospital. Nine months after announcing the deal, Moore is out as CEO, replaced this month on an interim basis by Kelly Morgan after the board expressed a desire to move in a different direction. The board of directors is now controlled by four new members who campaigned against the Quorum deal.

Another potential factor in Quorum’s move? The Oregon Senate Committee on Health Care decided in March not to advance a bill that would have granted $10 million in state funds to the hospital to help it ride out its financial difficulties.

Challenges remain

Now Bay Area must look again for a way to navigate through an obstacle-strewn landscape.

Many hospitals and health systems are reporting losses based on escalating labor costs and largely stagnant reimbursements from the Oregon Health Plan.

Bay Area Hospital is owned by a local government hospital district. While it can ask voters to approve property taxes, it has not done so for nearly 40 years. As a government institution it is prohibited from investing in the stock market, as other hospital chains have done to boost their reserves. And its situation is growing worse by the day.

The Coos Bay World reported last month that Bay Area Hospital’s interim chief financial officer Karen Miller said the hospital had lost $20 million through the first five months of the year.

As of 2023, only about 17% of the hospital’s patients were covered by commercial insurance. Almost all the rest were covered by Medicaid or Medicare. That reflects the demographics of the service area, which is lower-income and elderly. It represents a significant drawback, as commercial insurance typically pays much higher reimbursement rates than Medicaid and Medicare.

Mike Selvaggio, the political director for United Commercial and Food Workers Local 555, which vigorously opposed the Quorum deal, said Friday he was “not entirely surprised” by the termination of the Quorum negotiations. He said that Bay Area still must find a way to stabilize and improve its operating picture. He said the local was in touch with hospital leaders to discuss next steps.

“The commitment of the board to preserving access to high-quality health care on the South Coast remains unchanged,” Simon Alonzo, chairman and newcomer to the hospital board, said Friday in a prepared statement. “Bay Area Hospital is essential to the health and well-being of our community, and we are focused on evaluating all possible options to ensure its long-term stability.”