McKenzie-Willamette poised for nonprofit ownership as Medicaid cuts loom

McKenzie-Willamette Medical Center in Springfield will soon be owned by a nonprofit health care organization if regulators approve a merger, a change that its private equity-backed owner hopes will help the hospital weather looming Medicaid funding cuts.

The ownership change is part of a proposed merger between the hospital’s current owner, Tennessee-based Quorum Health, and Healthside Partners, which Quorum officials call a newly formed nonprofit. Quorum CEO Chris Harrison said the company will not disclose how much the deal cost Healthside.

The proposal comes as hospitals prepare for Medicaid funding reductions under the “One Big Beautiful Bill Act,” which passed last year. The law is projected to cut $911 billion in federal Medicaid and Children’s Health Insurance Program spending during the next 10 years, according to a March report from consumer advocacy group Public Citizen. The report identified McKenzie-Willamette among 446 U.S. hospitals that could face greater financial strain and pressure to reduce services because of the cuts.

Harrison, though, said Quorum is not considering hospital closures if the deal is not approved and would instead pursue strategic cuts.

Quorum officials said the merger will not lead to layoffs or pay cuts for employees at McKenzie-Willamette or elsewhere within Quorum.

“If the transaction wasn’t announced (online), then the average employee and community member would have no idea that anything changed,” Harrison said Friday, May 29, in an interview with Lookout Eugene-Springfield.

He added the merger is not expected to result in immediate service changes at McKenzie-Willamette or 10 other hospitals and medical facilities that Quorum operates in eight states outside of Oregon. However, Quorum says the ownership change would make its hospitals eligible for some discounted prescription drug purchases through the federal 340B Drug Pricing Program, generating an estimated $11 million in annual savings.

Harrison said the proposed nonprofit ownership structure is intended to help Quorum hospitals absorb the impact of future Medicaid reductions.

“A lot of these changes are about setting up ways to weather the cuts that are coming from the Big, Beautiful Bill,” Harrison said.

Harrison said the merger is definitive and will only fall through if state or federal regulators decline to approve it. He added that Friday, Quorum submitted an application to the Oregon Health Authority to allow its transition to a nonprofit model. The company hopes regulators will approve the change by the end of September.

​Quorum projects the switch to a nonprofit owner will save the hospital system — which declared bankruptcy in April 2020 — $13 million in annual taxes. Company officials said the change will also allow donors to claim tax deductions for contributions, potentially increasing charitable giving and bringing in additional funding.

Healthside plans to invest $300 million in Quorum-owned facilities during the next three years, including outpatient expansions, facility upgrades and new technology, according to Quorum. Harrison said he doesn’t yet know how much of the $300 million McKenzie-Willamette will receive or what renovations and improvements will be.

​“We haven’t done the math. I can’t really answer that question today,” Harrison said. “A lot of it depends on the community and support from the community and where the funds can be used.”

​Healthside Partners didn’t respond to multiple requests for comment, and Lookout couldn’t find any public statements from the nonprofit regarding the deal. Healthside’s website says it is a nonprofit company that “believes rural and mid-sized hospitals are destined for more than just survival.” It’s not clear where the company is based, who its donors and backers are, or whether it already owns hospitals or other medical facilities.

Healthside “combines the compassion of community-based care with the innovations once reserved only for large urban networks,” the website states.

Unions speak on proposal

​A spokesperson for the Oregon Nurses Association, which represents most of McKenzie-Willamette’s registered nurses, said the union doesn’t have a comment on the deal between Quorum Health and Healthside Partners.

​“We’re still gathering information about the change and how it could impact patients, providers and our community,” Oregon Nurses Association spokesperson Kevin Mealy said in a statement.

​A spokesperson for Service Employees International Union Local 49, which represents custodians, pharmacists and other clinical support staff at McKenzie-Willamette, said the union hopes the ownership change will lead to investments that put “patients over profits.”

​“We hope some of the money saved by McKenzie becoming a nonprofit will be invested in patient care and better pay and benefits for the caregivers at the hospital,” SEIU Local 49 spokesperson Alan Dubinsky said in an email.