Sent via email to: Kate.E.Denison@state.or.

us

January 8, 2016
Attorney General Ellen F. Rosenblum
Oregon Department of Justice
Attention: Kate Denison
1515 SW Fifth Avenue, Suite 410
Portland, Oregon 97201
Re: St. Joseph and Providence Request for a Waiver from the Attorney General
Standard Review Process
Dear Attorney General Ellen F. Rosenblum,
The undersigned organizations appreciate this opportunity to comment on the request
by St. Joseph Health (St. Joseph) and Providence Health and Services (Providence)
(collectively, the Parties) for a waiver from the Attorney Generals standard process for
reviewing merger transactions.
We urge the Attorney General to reject the waiver request made by the Parties and to
proceed with the standard review process laid out in Or. Rev. Stat. 65.800 et seq. In

particular, we highlight the need for an independent health care impact statement to
fully assess the current level of reproductive, end-of-life, and other health services
available in the hospitals involved. Additionally, given the population covered by these
hospitals, it is important that this transaction have adequate public input from all
affected communities.
The Proposed Transaction is Subject to Or. Rev. Stat. 65.800 et seq
In their waiver request, the Parties assert that the literal wording of the statute does not
cover the proposed transaction, and that the intent of the statute is fulfilled without the
notice requirement. This narrow reading of the statute leads to its misapplication.
While it is true that no transfer of assets occurs as a result of this proposed transaction,
the Attorney Generals review process is critical to determining that the public will not be
harmed as a result of the transaction. The intent of the statute is to not only ensure fair
and reasonable terms for the non-profit hospital, but also to make certain that the
transaction will not diminish availability or accessibility of health care services, and that
the transaction is in the public interest. 1
Prior to the proposed transaction, Providence was already the sixth largest nonprofit
hospital system in the U.S. 2 This transaction will result in a very large health care
system, covering six states. It also involves the creation of a new parent corporation
which will control overall mission, vision, strategic, financial, and operational direction
for the Parties. Even absent the transfer of assets, significant changes in health care
delivery are likely to occur, and it behooves the Attorney General to undertake the full
review process to ensure that this transaction preserves existing health care services
and benefits the public interest.
Need for an Independent Health Care Impact Statement
While the statute does not specifically require one, the Attorney General should prepare
an independent health care impact statement which, among other things, specifically
assesses the effect of the transaction on reproductive health services. Or. Rev. Stat.
65.811(7-8) require the Attorney General to deny transactions if they are not in the
public interest, or if the proposed transaction significantly diminishes the availability of
health care services. Preparing an independent health care impact statement is in the
spirit of the statute as it allows a full review of the health care services currently offered
at the Parties hospitals. Gathering this baseline information will allow the Attorney
General to make certain the proposed transaction is in the public interest by not
hampering the availability of health care services.
St. Joseph and Providence are both Catholic health systems. Catholic hospitals must
typically follow the Ethical and Religious Directives (ERDs) promulgated by the United
1

Or. Rev. Stat. 65.811(7-8).

Erin Marshall, 10 Largest Nonprofit Hospital Systems: 2015, BECKERS HOSPITAL REVIEW (Dec. 23, 2015,
11:48 AM), http://www.beckershospitalreview.com/lists/10-largest-nonprofit-hospital-systems-2015.html
2

States Conference of Catholic Bishops. The ERDs forbid all reproductive health
services, including all birth control methods, sterilization, miscarriage management,
abortion, the least invasive treatments for ectopic pregnancies, and some infertility
treatments. The ERDs provide no exceptions for risks to a patients health or even life.
In addition, the ERDs limit medical end-of-life decision making of patients by specifically
subjecting advanced directives, surrogate decision-making, and withdrawal of life
sustaining procedures to Catholic moral principles.
Every patient who enters a hospital, clinic, doctors office, or any other medical setting
expects that she or he will receive treatment information and services that meet the
standard of care. Yet, the restrictions the ERDs place on Catholic hospitals are severe
limitations that violate basic evidence-based standards of care accepted medical
practice and as adopted by the major professional medical associations. The
restrictions prevent willing providers from providing the standard of care to their
patients. For example, even when a pregnant woman is miscarrying, treatment options
to protect the womans health are limited if the non-viable fetus has a heartbeat. See,
for example, the research of Drs. Lori Freedman and Deborah Stulberg documenting
practices that endanger the lives of pregnant women, and the ways in which Catholic
hospital requirements prohibit physicians from practicing medicine in accordance with
their training. 3
Further, the Parties assert that this proposed transaction will provide a platform for
clinical integration and the sharing of best practices. 4 Given the Parties Catholic
affiliation and the requirement they follow the ERDs, a full review is necessary to ensure
that true best practices are employed and that the Parties adhere to the basic,
evidence-based standards of care.
We know that some St. Joseph and Providence hospitals are non-Catholic, and do
currently provide some reproductive health services. Swedish Medical Center is a
secular group of hospitals in Washington that affiliated with Providence in 2012. Even
after their affiliation, the Swedish hospitals continue to provide birth control services
such as tubal ligations and vasectomies. Their written policy also allows for terminations
of pregnancy [w]hen necessary, on an emergency basis. 5 They also continue to allow
physicians to prescribe medication pursuant to state death with dignity statutes, but are
barred from allowing patients to self-administer such medication on premises.
We also know that there are some reproductive health services being provided even
among the St. Joseph and Providence Catholic hospitals. For example Providence
Portland Medical Center provides postpartum tubal ligations on a case by case basis,
3

Lori Freedman et. al., When theres a heartbeat: miscarriage management in Catholic-owned hospitals,
Am J Public Health (Oct. 2008), Deborah Stulberg et. al., Tubal ligation in Catholic hospitals: a qualitative
study of obgyns' experiences, Contraception (May 2014).
4
Letter from Robert Schuchard, Attorney, Davis, Wright, Tremaine LLP to Ellen F. Rosenblum, Attorney
General, State of Oregon (Nov. 30, 2015).
5 Swedish News, FAQ: Swedish Reproductive and End-of-Life Care, April 9, 2014,
http://www.swedish.org/about/swedish-news-blog/2014/04/faq-swedish-reproductive-and-end-of-life-care

based on medical necessity, 6 while other St. Joseph and Providence Hospitals do not
provide tubal ligations under any circumstances.
Outside of Oregon, Alaska Womens Health, Providence Campus, is affiliated with
Providence Alaska Medical Center, and provides infertility care and family planning,
including emergency contraception, vasectomies, tubal ligations, and various types of
birth control. 7
As is evident from the above examples, the fact that St. Joseph and Providence are
both Catholic health institutions is not dispositive as to the provision of reproductive
health services within their hospitals. Here, we simply do not have a complete
understanding of the health services being provided at each of the Oregon hospitals
involved in this transaction. The Attorney General is charged with protecting the public
interest, and one aspect of this duty is ensuring that health services currently being
provided are not diminished or eliminated as a result of this transaction. Yet before the
Attorney General can adequately guarantee that reproductive health services not be
diminished or eliminated as a result of this transaction, we first need an independent
assessment of precisely what those reproductive health services are.
While we acknowledge that the Parties state in their request for a waiver that there will
be no impact from the transaction on the service offerings in the Oregon communities
and populations served by the 8 hospitals owned and operated by Providence, such a
guarantee means little in the absence of a baseline to establish what current
reproductive health services are actually available. An independent health care impact
statement would provide the Attorney General with an up to date evaluation of the
reproductive health services currently being provided at each of the hospitals involved in
this transaction. This in turn would help ensure that any decision made about the
proposed transaction take into full account the protection and maintenance of critical
reproductive health services in each of the hospitals involved.
Public Meetings and Community Input
Or. Rev. Stat. 65.807(1) requires that the Attorney General conduct a public hearing on
the proposed transaction. The purpose of the public meeting is to receive input and
comments from the immediate community to be directly affected. This critical step in the
review process should not be waived.
This proposed transaction involves eight hospitals across Oregon, and a total of almost
50 hospitals across six states. The sheer reach of the two health entities involved is
massive and thus has a potential impact on health services for a significant population.
6 Conversation with physicians who previously worked at Providence Portland Medical Center. Medical
necessity is determined by the treating physician, who submits a letter to the nuns, who either approve or
deny the request.
7 Alaska Womens Health, PC, Family Planning/Birth Control Services,
http://www.akwomenshealth.com/family-planning-and-contraceptive-counseling.html

Paramount in the Attorney Generals considerations of whether to deny a waiver is

impact to the public and affected community, including that the proposed transaction is
in the public interest, as per the requirements of Or. Rev. Stat. 65.811(8). Public
testimony, input, and comment, is vital to ensuring that the Attorney General can make
a fully informed decision about this transaction in a way that best protects the availability
of health services and the public interest. Given the number of hospitals involved,
granting a waiver would simply not allow all the affected communities adequate input to
voice their health care services needs and any concerns about the transaction.
Thank you for considering these comments. If you have any questions or need further
information, please contact Susan Berke Fogel at fogel@healthlaw.org or 310-7361658, or Amy Chen at chen@healthlaw.org or 310-736-1782.
Sincerely,
Susan Berke Fogel
Director, Reproductive Health,
National Health Law Program
ACLU of Oregon
Asian Pacific American Network of Oregon
Catholics for Choice
Compassion & Choices
Lambda Legal Defense and Education Fund
Legal Voice
Lois Uttley
Director
MergerWatch
Michele Stranger Hunt
Executive Director
NARAL Pro Choice Oregon
Northwest Health Law Advocates
Physicians for Reproductive Health
Pride Foundation
Western States Center

January 8, 2016
VIA E-MAIL AND FIRST CLASS MAIL
Attorney General Ellen Rosenblum
Oregon Department of Justice
Attn: Kate Denison
1515 SE 5th Ave, #410
Portland, OR 97201
Re: Denial of the request for written waiver concerning proposed merger of Providence
Health & Services and St. Joseph Health System
Dear Attorney General Rosenblum:
I am writing to you on behalf of the Service Employees International Union, Local 49 in
Oregon to articulate our concerns surrounding the proposed merger of Providence Health
& Services (Providence) and St. Joseph Health System (St. Joseph), both non-profit
Catholic hospital systems. SEIU Local 49 is an over 12,000 member union, representing
healthcare and property service workers. When combined with our sister SEIU local in
Oregon, SEIU is the largest union in the state representing over 65,000 public and private
sector workers throughout Oregon and Southwest Washington. Not only do we represent
many hospital and healthcare workers in the state, SEIU is also a major purchaser of
health benefits.
We believe that a full review of the proposed transaction is necessary, in accordance with
ORS 65.807. The resulting entity from this merger will continue to be charitable, but we
believe that there are exceptional facts here that warrant Attorney General review. We
request your consideration of the following concerns and urge you to deny the requested
waiver. Providence plays a large role in Oregon; therefore any changes are
significant to Oregonians.
Foundational to our concerns is the significant role that Providence plays in the Oregon
health system market. Due to its size and market dominance we believe that any change
to the governance or operation of Providence Health System, even at high levels, could
potentially have significant impact on health care in Oregon.
Providence is a major provider of health care:
Providence Health & Services-Oregon owns and operates more hospitals than any other
organization in the state. They are the major healthcare provider in Oregon- serving 19%
of all discharges across the state and managing nearly 20% of available, acute-care
hospital beds. 1 Additionally, Providence operates a substantial network of clinic services
and is expanding their integrated network within Oregon.
1

Oregon Health Authority, Office for Oregon Health Policy and Research, Databank (count of discharges,
available beds, 2014.)

Providence is a major insurer:

In addition to operating hospitals across the state, Providence offers a state-wide insurance plan. While
some health systems are taking steps to integrate and grow, Providence has few competitors that can
match Providences size and geographic breadth in our state. In 2014 Providence insured over 300,000
people in the state, or over 12% of the covered lives in Oregon.2
Providence is a major employer:
With Providence offering so many services in Oregon, it has grown into a major employer and economic
driver. Twenty-five years ago Providence employed just over 4,000 people. Today, Providence employs
over 15,000 people in Oregon and is the second largest employer in the state.3
Providence is a major healthcare provider, insurer and employer in the state of Oregon and as such the
proposed merger with St. Joseph warrants careful consideration. Accordingly, it is crucial to ensure that
the Attorney General has been provided with adequate information to evaluate the transaction, that the
transaction will not diminish availability or accessibility of healthcare services, and that the proposed
transaction is the in the public interest.
I.

Concern over insufficient disclosure by Providence

The letter submitted by Providence to the Attorney General dated November 30, 2015 includes disclosure
that:
The authority of the Newco Board will be subject to certain reserved powers of a new CoSponsors Council, a joint council to be created by Providence Ministries and St. Joseph Health
Ministry and to which each will vest certain rights and authority with respect to the government
and operation of its health system.
The rights of the Co-Sponsors Council are set forth in Exhibit 2.2(a), one of the exhibits excluded and
classified by Providence as containing confidential trade secrets. As such, the applicant did not include
the exhibit in the initial submission to the Attorney General dated November 30, 2015. If certain
governance and operational rights are retained by the new Co-Sponsors Council then those rights must
be fully disclosed and reviewed.
II.

Concern over access to services due to cost and religious order directives

As a merged hospital system, we are concerned that market concentration and reduced healthcare services
due to religious restrictions may create barriers to access. We urge your Office to investigate the access
presented by the merged system, especially as it becomes a market dominator.

Oregon Department of Consumer and Business Affairs, Quarterly Health Enrollment, 2015, Q3.
Oregons Biggest Employers are Getting a Lot Bigger - 25 Year Pattern Go Local PDX July 8, 2015.
http://www.golocalpdx.com/business/oregons-biggest-employers-are-getting-a-lot-bigger-25-year-pattern

Consolidation can lead to higher prices, reducing affordability

The accessibility of health care in the United States is a function not only of capacity, but increasingly of
cost. Health care that is not affordable is not, for any practical purpose, accessible. We have serious
concerns that the proposed merger will result in higher costs for Oregon patients.
Mapping the combined portfolios of Providence and St. Joseph Health Systems shows a constellation of
hospitals, belonging to a single system, dotting the entire Western seaboard of the United States. The
applicant stated that through the Providence and St. Joseph merger, they will gain the geographic
presence required to adapt to todays evolving healthcare landscape. While the hospital footprint will not
change in Oregon, the negotiating power of the combined entity is likely to increase across the West. Yet
it is unclear how the benefits of such power and any achieved efficiencies will be distributed.
There have been numerous academic studies linking hospital consolidation to increased prices.4 The latest
report, released in December 2015, found that hospital prices are positively associated with indicators of
hospital market power.5 The papers lead author Zack Cooper, an assistant professor of economics and
health policy at Yale University, stated that the reason why health insurance for the privately insured is
expensive is because the prices from hospitals with a lot of market power are higher.6
Not only are we unsure where the benefits of the consolidation will be reaped, we are concerned that St.
Josephs higher prices could creep into Oregon hospital operations. Providences hospitals in Oregon are
generally on par with other hospitals in the state, both in terms of Cost to Charge Ratios and Medicare
Spending per Beneficiary. However, St. Joseph hospitals consistently have lower Cost to Charge Ratios
than Providence hospitals in Oregon, possibly indicating higher prices.7 While Oregon hospitals operated
by Providence have a Medicare Spending per Beneficiary (MSPB) that averages ten points below the
national average, St. Joseph hospitals average only two points below the national average.8,9 These
combined statistics lead us to be concerned about the operational efficiency and prices of the combined
system and its impact on Oregon hospitals. (Please see table on following page.)

Gaynor, Martin Ph.D. and Robert Town, Ph.D., The Impact of Hospital Consolidation- Update Robert Wood Johnson
Foundation, Research Synthesis Report No. 9, June 2012.
http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2012/rwjf73261
5
Cooper, Zack, Stuart Craig, Martin Gaynor and John Van Reenen, The Price Aint Right? Hospital Prices and Health Spending
on the Privately Insured National Bureau of Economic Research, Working Paper No. 21815, December 2015.
http://www.healthcarepricingproject.org/sites/default/files/pricing_variation_manuscript_0.pdf
6
Quealy, Kevin and Margot Sanger-Katz, The Experts Were Wrong About the Best Places for Better and Cheaper Health Care
New York Times, December 15, 2015.
http://www.nytimes.com/interactive/2015/12/15/upshot/the-best-places-for-better-cheaper-health-care-arent-what-expertsthought.html
7
Data used to calculate Cost to Charge Ratios comes from Medicare Cost Reports. Analysis was limited to short-term general
acute care hospitals and critical access hospitals. Further methodology available upon request.
8
Medicare Spending per Beneficiary as reported by the Centers for Medicaid and Medicare Services. Reporting period January 1,
2014 through December 31, 2014. https://www.medicare.gov/HospitalCompare/data/efficiency-domain.html
9
According to CMS, the Medicare Spending per Beneficiary is a measure of efficiency based on an assessment of payment for
services provided to a beneficiary during a spending-per-beneficiary episode that spans from 3 days prior to an inpatient hospital
admission through 30 days after discharge. The payments included in the measure are standardized and adjusted so that variation
in geographic costs are removed, as well as variation in patient health status.

Hospital

Cost to Charge
Ratio

Medicare Spending per

Beneficiary
displayed in ratio - national average: 0.984

St Joseph Hospitals, California

Santa Rosa Memorial Hospital
Queen of the Valley Medical Center
Petaluma Valley Hospital
Saint Joseph Health Saint Mary
Saint Joseph Hospital Eureka
Saint Jude Medical Center
Mission Hospital Mission Viejo
Saint Joseph Hospital Orange
Hoag Orthopedic Institute
Hoag Hospital Newport Beach
Providence Hospitals, Oregon
Providence Medford Medical Center
Providence Milwaukie Hospital
Providence Saint Vincent Medical Center
Providence Portland Medical Center
Providence Newberg Medical Center
Providence Willamette Falls Medical Center
Providence Seaside Hospital

16%
18%
19%
19%
21%
21%
21%
23%
24%
30%
32%
37%
39%
39%
40%
40%
54%

Average: 0.962
0.950
0.911
0.918
0.979
0.917
1.042
0.953
1.011
0.949
0.993
Average: 0.881
0.892
0.902
0.917
0.916
0.816
0.843
n/a

As Oregon sees an increased number of hospital mergers and transactions, we believe that the Attorney
General should help ensure that purported efficiencies result in actual benefits accruing to the public and
Oregonians broadly. To help protect healthcare services in Oregon, the Attorney General should consider,
after a full review of the transaction, a condition that would bar Providence from unreasonably raising
prices for services at Oregon hospitals. For example, the Attorney General could require Providence to
enter into an agreement committing to raise prices at a rate no greater than the increase in the hospital
operating market basket or input price index, which is a forecast used by the Centers for Medicaid and
Medicare Services in the federal Department of Human Services to adjust rates in the prospective
payment system used by the Medicare program.10 We also urge you to consider how excess earnings
generated by hospitals in Oregon could be dedicated to benefitting Oregon patients and communities,
rather than being sent out-of-state and used to pursue further expansion of a consolidated heath system.
Restrictions on womens health, reproductive health, LGBT health, and end of life care
The entity resulting from the merger will control a significant portion of the healthcare market in Western
states and patients may have a difficult time accessing certain lines of care including womens health
services such as tubal ligations, reproductive health services, LGBT health services, and end of life care
services due to the merged entitys adherence to Catholic doctrine. We therefore urge that the Attorney
General, after completing a full review, consider a conditional approval where the merged system donates
10

Information regarding the Market Basket data can be found here: https://www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/MarketBasketData.html

significant funds to Planned Parenthood or an equivalent health care provider to supplement the services
not provided within the combined system.
To illustrate our concern we look to Providences take-over of Swedish Medical in Seattle. Swedish
claimed to remain a secular facility following their affiliation with Providence, yet medical terminations
of pregnancies, once performed at Swedish facilities, were no longer allowed. Swedish patients with highrisk or non-viable pregnancies found their medical options severely limited when Swedish, under
Providences direction, began adhering to Catholic doctrine.11
A recent partnership between Providence and Walgreens further highlights our fear that this merger could
lead to restrictions on certain services. By early 2016, six Walgreens location will house clinics operated
by Providence in Washington and Oregon, with an expansion plan of opening nineteen additional clinics
in Walgreen stores over the next two years.12 This expansion has sparked criticism from activist groups
over the partnership, as Providence has a well-established reputation for impeding access to reproductive
and end of life services.
The American Civil Liberties Union, joined by nineteen groups including Planned Parenthood and
NARAL, is raising concerns that the Providence-affiliated Walgreens clinics will follow Catholic ethical
guidelines and potentially impact access to contraception, abortion drugs, and prescriptions to help
terminally ill patients end their own lives. The groups are worried that the Walgreens-Providence clinics
will follow in the footsteps of Swedish Medical Center in restricting access to vital health services
eschewed by religious parent-company Providence. Several gay rights organizations have voiced further
opposition to the new business model because complying with religious doctrine will inevitably result in
unfair treatment of the LGBT community and prevent transgender patients from receiving hormone
therapy prescriptions at these clinics. 13,14

III.

Review Required To Ensure Transaction Is In The Public Interest

As previously stated, the combined portfolios of Providence and St. Joseph Health System will result in a
massive, consolidated market force spanning from California to Alaska. While perhaps this merger could
possibly see some gains in efficiency, Oregon should put in place assurances that our health centers and
patients will share in the benefits.

11

Ostrom, Carol Under pressure on abortion, Swedish backs new Planned Parenthood clinic Seattle Times, October 14, 2011.
http://www.seattletimes.com/seattle-news/under-pressure-on-abortion-swedish-backs-new-planned-parenthood-clinic /
12
Walgreens and Providence form clinical collaboration Providence press release,
http://www2.providence.org/phs/news/Pages/walgreens-collaboration.aspx
13
Should Catholic hospital run Walgreens clinics? ACLU has concerns Oregonian (Associated Press) December 14, 2015.
http://www.oregonlive.com/pacific-northwest-news/index.ssf/2015/12/should_catholic_hospital_run_w.html
14
Groups concerned about Walgreens' ties to Catholic hospital Chicago Tribune, December 14, 2015.
http://www.chicagotribune.com/business/ct-walgreens-aclu-providence-health-20151214-story.html

Workers rights, compliant pension plans

Providence employees allege that Providence has underfunded their pension by up to $819 million and
evaded federal pension law by improperly classifying its employees pension under a Church Plan.15 This
lawsuit raises a question about how the merged employees pensions will be classified. To address this
concern we urge the Attorney General to require the merged pension funds be ERISA compliant,
including those plans that sit outside of Oregon. Such a condition would help avoid unfair competition.
For example, major market competitors such as Kaiser, Legacy, and OHSU dont use this questionable
exemption and therefore derive no unfair benefit. Without this condition, the risk to the marketplace is
significant.
Protecting and building for the future in Oregons healthcare industry
The transaction between Providence and St. Joseph is not the only healthcare consolidation occurring
within the state. We are concerned that the impact of the whole may become greater than the sum of the
parts. While a difficult task, we believe the Attorney Generals office is empowered to review and defend
against adverse impacts from these changes.
Considering the points above, we urge you to deny the request for a waiver and complete a full review of
the proposed transaction. Only through a full review can Oregonians be assured that conditions protecting
the public interest are met. Specifically, we want to make sure that the Attorney General has been
provided with sufficient information, that access to health care services will not be diminished, and that
the transaction is in the public interest.
Thank you for your consideration.
Sincerely,

Meg Niemi
President, SEIU Local 49

15

Zak, Annie, Providence workers file lawsuit alleging health system uses religious tax exemption to skirt pension law Seattle
Business Journal, December 3, 2014.
http://www.bizjournals.com/seattle/blog/health-care-inc/2014/12/providence-workers-file-lawsuit-alleging-health.html
Kutscher, Beth Providence expects more revenue after costly improvements Modern Healthcare, June 14, 2014.
http://www.modernhealthcare.com/article/20140614/MAGAZINE/306149764