Oregon Health & Science University is grappling with deeper financial troubles than expected, as losses continue to mount ahead of its planned acquisition of its longtime rival Legacy Health.
The university reported this week that it has racked up $71.5 million in losses through the first nine months of the fiscal year — putting it on course for a $95 million deficit by June, when the current fiscal year ends. The mounting losses come as OHSU continues to pursue the Legacy acquisition, which would commit it to more than $1 billion in upgrades to Legacy’s facilities over the next decade.
At a board of directors meeting on Friday, university leaders outlined an aggressive plan to cut its losses nearly in half next year. They hope to increase OHSU’s revenue by 12% next year, driven largely by complex-care services like cancer treatment, while limiting total employee compensation growth at 10%.
Lawrence Furnstahl, OHSU’s chief financial officer, said the university is planning for a $45 million deficit for the 2026 fiscal year and keeping the institution’s negative operating margin below 1%. It will also trim capital projects and dip into cash reserves originally earmarked for future investment.
“Over time we will have to scale OHSU’s missions and services to the resources available, and that is the reality of the budget,” Furnstahl said, “but we fully recognize that more cuts than currently planned now would result in excessive damage to our missions and people.”
OHSU leaders attribute the losses to insurance reimbursements they say haven’t kept up with costs, hospital stays that are longer than the historic norm, and increased staffing costs tied to staffing laws that set minimum nurse-to-patient ratios in hospitals. They said OHSU has given more financial assistance to patients than it expected as a result of a new law requiring hospitals to pre-screen patients for eligibility.
Furnstahl said next year’s budget proposes to cap pay raises for faculty and managers to 2% and job keeping vacancies open rather than filling them when possible. OHSU is also implementing a pay-for-performance initiative, in which employees’ compensation will be tied to productivity benchmarks.
Dr. Nathan Selden, dean of OHSU’s School of Medicine, said the university plans to complete the new 513,000-square-foot Vista Pavilion, a $650 million project that will add 128 new cancer treatment beds, and spend $10 million in planning the expansion of OHSU Hospital’s emergency department. Selden said that OHSU would delay the construction of expanding space for high-risk pregnancy care at Doernbecher Children’s Hospital.
The meeting was attended by union-represented workers, including researchers, faculty, nurses and advanced practice providers, who called on OHSU leaders to negotiate a first contract with recently unionized nurse practitioners and physician assistants.
Duncan Zevetski, a shift nurse in adult oncology and vice president of the bargaining unit represented by the Oregon Nurses Association, criticized OHSU’s focus on growing its hospital bed capacity at the expense of investment in family medicine and primary care.
“When people are not able to access primary care where they are comfortable, where they know their providers and have time to speak to their issues, they come through the overcrowded emergency department putting more work on the nurses and advanced practice providers,” he said. “You are planning to spend a billion dollars purchasing Legacy. What does that look like if you invested in family medicine?”
The budget proposal leaves unaddressed major uncertainties tied to federal funding cuts that could further destabilize OHSU’s finances.
Potential deep cuts to Medicaid and National Institutes of Health funding under the Trump administration’s latest budget proposals, still largely undefined could become existential threats for OHSU’s research enterprise.
Peter Barr-Gillespie, OHSU’s chief research officer, said a major concern is the reduced “indirect” funding that institutions receive as part of research grants from federal funding agencies like the National Institutes of Health. OHSU’s indirect cost reimbursement rate is 56%, which helps cover overhead costs tied to conducting research; the Trump administration has sought to reduce it to 15% of the direct grant amount.
While the administration’s proposed cap on indirect funding is being challenged in courts, Barr-Gillespie said he expects a “some kind of reduction” in those payments in the future.
The NIH has also scaled back its awards of new grants and grant renewals, Barr-Gillespie said. He said OHSU received only 11 competitive grant renewals between January and April, compared to 134 during the same period last year.
This contraction in funding comes on top of the NIH’s abrupt terminations of research grants related to COVID-19, health disparities, HIV/AIDS and other areas, which has hit OHSU and research institutions nationwide.
“The administration has made it very clear it has different priorities for funding health-related research in the future,” Barr-Gillespie said. “What I worry about is that the research programs of our faculty will not align with those priorities.”
Barr-Gillespie said political pressure to shutter the Oregon National Primate Research Center in Hillsboro, a facility operated by OHSU, represents another threat to OHSU’s financial viability. Already, Gov. Tina Kotek has voiced support for closing the center, which has long been targeted by advocacy groups like PETA and the Physicians Committee for Responsible Medicine.
Barr-Gillespie said closing the center could cost OHSU at least $100 million — expenses that stem from retaining staff during the transition, finding homes for the 6,000 nonhuman primates and decommissioning the 35 buildings on the center’s campus.
Meanwhile, OHSU leaders barely mentioned the planned Legacy merger at Friday’s meeting.
In a session that stretched just over two hours, Steve Stadum, OHSU’s interim president, spoke briefly on the topic. He acknowledged that a community advisory board convened by state health regulators voted unanimously that the Oregon Health Authority reject the transaction, but their vote lacks any regulatory authority.
Stadum said OHSU expects a final decision from the state regulators with the power to allow or veto the transaction by May, but admitted that he was unsure of the state’s time table.
— Kristine de Leon covers consumer health, retail, small business and data enterprise stories. Reach her at [email protected].
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