Small Oregon hospital says it’s running out of money, seeks emergency exemption for Salem Health merger

By KRISTINE DE LEON/The Oregonian/OregonLive

Santiam Hospital says it is running out of time to avoid insolvency and is asking Oregon regulators to approve its merger with Salem Health through an emergency review process.

The two nonprofit health systems said Wednesday the rural Stayton hospital faces “imminent insolvency” and cannot wait months for state officials to complete their review. Instead, they’re asking the state to exempt the merger from that process.

The request leaves Oregon regulators weighing competing concerns. Santiam says it needs an immediate financial lifeline to continue serving the Santiam Canyon area, while the state has said it needs more time to determine whether the merger could reduce competition, increase healthcare costs or leave patients with fewer choices.

Salem Health and Santiam have already withdrawn the application that had been under state review since April and replaced it with an emergency exemption request, according to Oregon Health Authority spokesperson Franny White.

That request brought the ongoing merger review to a halt, and state officials are now evaluating whether the merger qualifies for an emergency exemption. Before making a decision, officials may ask the hospitals for more information, then release a public version of the request and open another round of public comment, White said.

The proposed merger is being considered by the Oregon Health Care Market Oversight program, which was created by state lawmakers in 2022 to review major hospital mergers and other large healthcare deals before they’re finalized. Regulators can approve, modify or block deals they determine could reduce access to care, increase costs or otherwise harm the public. 

The state has granted an emergency exemption before. In 2024, regulators approved Optum’s acquisition of The Corvallis Clinic before completing its review after concluding the medical practice faced an urgent financial crisis.

Investment pledge

When Salem Health and Santiam Hospital announced the merger in January, they said it would strengthen healthcare in rural communities. Salem Health also pledged to invest $61 million in Santiam over the next decade and bring the 40-bed Stayton hospital into its nonprofit health system.

Santiam says its finances have deteriorated so rapidly that what began as a long-term partnership has become an emergency.

The hospital serves about 50,000 residents through its hospital, 13 clinics and the Santiam Canyon’s primary ambulance service. It is also the canyon’s largest private employer, with about 750 employees.

Hospital leaders said Santiam’s cash reserves have fallen below the level Bay Area Hospital had before Oregon lawmakers approved a state-backed rescue package earlier this year. Without swift approval of the merger, they said, Santiam could be forced to make deep cuts that would reduce access to care across the canyon.

“Despite our commitment to preserving access to care, our financial outlook is expected to worsen,” Santiam President and CEO Maggie Hudson said in a statement. “Santiam’s expenses are up, and revenue has not kept pace with these cost increases.”

Hospital leaders said Santiam has to replace its Epic electronic health record system by September but lacks the money to do so. Without a functioning medical records system, they said the hospital cannot operate.

Hudson said delaying approval could have consequences far beyond the hospital itself. She said residents of communities including Mill City, Gates, Detroit and Idanha could lose local emergency and maternity care and, in some cases, face drives of more than an hour to the nearest hospital.

Before the hospitals withdrew their application, the proposed merger had already sparked sharp debate among patients, insurers and healthcare providers.

Dozens of comments

During its preliminary review, the Oregon Health Authority received more than 80 public comments and concluded the proposal warranted closer scrutiny. The agency said Salem Health already has a dominant share of the Salem-area hospital market, citing research estimating the system accounts for about 89% of inpatient hospital discharges in the metropolitan area.

A growing body of research suggests hospital mergers often lead to higher prices without consistently improving quality of care. Regulators wanted more time to study whether acquiring Santiam would reduce competition, raise healthcare costs or leave patients with fewer choices.

One issue raised repeatedly during the review involved patients insured by Regence BlueCross BlueShield of Oregon. After Salem Health dropped out of Regence’s provider network last year, Santiam became one of the few nearby in-network hospitals for many members. Regulators also planned to examine how the merger could affect insurance networks and access to care.

Regence urged the state to closely scrutinize the merger, arguing it could reduce competition, increase prices and leave patients with fewer choices.

Salem Health and Santiam have asked regulators to rule on the emergency exemption request by Aug. 1, arguing the hospital cannot wait through the standard review process. 

This story was originally published on July 9, 2026 by The Oregonian/OregonLive.