This brief will go through the near-term and medium-term actions required to ensure long-term sustainability for the Bay Area Hospital.
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Systemic Fixes:
Lasting resiliency through system changes
After the immediate peril is addressed, we will need to work to address the systemic root causes of BAH’s insolvency:
Address the pattern of Critical Access facilities taking profitable services.
Explore regional service- sharing and cost-cutting models, as well as strategic partnerships.
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Refinancing Debt
Much of the Hospital’s present financial pressure traces back to a single financing decision: To engage high-interest private-sector debt instead of using low-cost public financing available through the Oregon Facilities Authority or other rate-advantaged programs for hospitals and public entities.
Today, a substantial share of the hospital’s revenue leaves Oregon entirely as interest payments to a foreign bank. Refinancing that debt with State-supported financing would immediately reduce the interest burden and provide the vital breathing room needed for the hospital’s restabilization plan to succeed.
Solution
Oregon law already allows the State to make interfund loans to its own agencies for cash-flow needs, but it does not yet extend that tool to public hospital districts.
The Hospital is supporting HB 4075, which would authorize the State to refinance some or all of Bay Area Hospital’s high-interest private debt through the Unclaimed Property and Estates Fund (ORS 98.389).
Key Safeguards in the Proposed Legislation:
The recipient must be a rural, publicly operated hospital that is classified as a DRG (large) hospital,
Loans may not be used for new capital improvements,
The hospital must submit a Restabilization Plan that is endorsed by the Oregon Health Authority,
Repayment rates must be at or above the effective Federal Fund Rate, and
Approval is ultimately at the discretion of the State Treasurer, considering various economic factors.
In addition, the Bay Area Hospital will seek to buy down some of the outstanding debt with lottery bonds, in addition to the vital Funding Request of $18 million.
THE SHORT VERSION:
In order to ensure that the restabilization plan has time to take effect as well as stem interest payments to a foreign bank, the State would assist in refinancing BAH’s private third-party debt.
Why the Unclaimed Property Fund?
The Unclaimed Property Fund is used because those monies are held in trust and are not permitted to be utilized for programmatic costs. Refinancing costs taxpayers nothing, competes with no programs, and keeps funds in Oregon.
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What kind of returns does this fund usually get?
The Unclaimed Property Fund is invested in tandem with the Common School Fund. Under the terms of HB 4075, the refinance would be treated as a fixed-income investment repaid at least at the Federal Funds Rate, which is currently between 3.50% to 3.75%. According to the most recent Common School Fund Annual Review by the State Treasury, the 3-to-5 year performance of the CSF's fixed income portfolio (which, per Investment policy 902, is the timeline on which benchmark performance is based) wavered between 3.3% and -0.3%. (See page 11 of the report linked to above)
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Funding request: $18 Million*
*Estimate. Final amounts may be adjusted slightly.
New leadership has swiftly put the Hospital on a clear path to financial stability, with a comprehensive plan now showing strong early progress.
This targeted $18 million will provide a blend of liquidity and resiliency:
$10 million to stabilize payroll and benefits, enabling accelerated recruitment of critical physicians and staff — especially OB-GYNs orthopedic surgeons, medical oncologists and cardiologists to safely deliver Coos County’s vital services to an aging population — while providing insurance against deferred capital needs and preserving essential services as long-term strategic partnerships are pursued.
$6.5 million to modernize the hospital’s aging catheterization lab. Cath labs allow for minimally invasive diagnosis and treatment of heart and blood vessel conditions, using thin tubes (catheters) to treat conditions or implant devices like pacemakers, often without major surgery.
$1.5 million to replace the Hospital’s CT (Computed Tomography) scanner. The CT scanner is an imaging tool that creates detailed cross section views inside a body and is vital for diagnostic and treatment purposes. These dollars will hopefully come from Lottery Bond proceeds, GF moneys, or a combination thereof.
THE SHORT VERSION:
The Bay Area Hospital is seeking approximately $18 million from the State to assist with emergent capital and staff development needs in order to improve resiliency.
Will the Hospital be sustainable after this?
Yes, though the Hospital plans to seek additional relief via a buy-down of debt through lottery bonds in this or future sessions.
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Lasting Resiliency
Internal Fixes and Regional Fairness
Once the immediate debt crisis is resolved, Bay Area Hospital is committed to driving internal improvements and pursuing strategic partnerships. Longer-term stability, however, will still require fixing a structural imbalance in rural healthcare reimbursement that currently puts BAH at a competitive disadvantage.
Actions already underway at the hospital:
Aggressive cost controls and responsible staffing adjustments. These painful but necessary steps are delivering results.
Active exploration of affiliation and clinical partnership opportunities with both private-sector and public-sector systems (for example, OHSU). These partnerships will share services, reduce duplication, and adopt proven best practices.
Systemic issue that must be addressed regionally and legislatively
Several Critical Access Hospitals (CAHs) exempted from current federal distance requirements operate within 30 miles of Bay Area Hospital. These CAHs receive significantly higher Medicare and Medicaid reimbursement rates while competing directly for the same profitable service lines (orthopedics, urology, general surgery, etc.). When complex or lower-revenue cases arise, patients are routinely transferred to Bay Area Hospital, which leaves BAH with the region’s costliest care at the lowest rates.
True resiliency for Coos Bay and Oregon’s southern coast requires two things:
Continued internal discipline and smart partnerships at the hospital level.
A level reimbursement playing field so one community hospital is not systematically shouldering all of the region’s costliest but least profit-bearing cases.
Legislative and Oregon Health Authority solutions under review include modernizing CAH distance exemptions, fairer transfer-payment policies, and targeted rural rate adjustments, all without reducing access in neighboring communities.
This blend of local accountability and statewide fairness will make Bay Area Hospital sustainable and viable for generations.
Why is Bay Area Hospital a Special Case?
Bay Area Hospital is the only DRG (large) hospital in Oregon that:
Is publicly owned and operated by an elected board,
Accepts referrals from four Critical Access Hospitals, and
Is the largest employer in its respective region.
Bay Area Hospital is the only large (> 50 beds) hospital serving the Oregon Coast and it has four Critical Access hospitals referring in. This makes it a lynchpin for the lives and well-being of Southern Coast residents in a way that is unique to any other publicly-owned hospital in the State.
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What’s the alternative?
Doing nothing is more expensive and will harm South Coast residents.
Without the requisite assistance, the Bay Area Hospital may be forced to turn to an alternative model that increases per-case reimbursement at the expense of access to care:
Downgrade its status to a Type B Hospital, reducing available beds to 50 or less,
Cease accepting most referrals from regional Critical Access Hospitals, and
Consider eliminating a number of non profit-bearing lines of services, including behavioral health and labor and delivery.
This would result in significant impacts on local jobs, State finances, and most notably, local public safety.
Loss of 97 full-time jobs and $9.1 million local wages lost.
$27.2 million estimated annual impact to State as a result of cost-based reimbursement through CCO, as well as increased Medicaid payments for transfers, delay of care, etc.
An estimated 2,089 patient transfers and 182 preventable deaths per year.
