THE PLAN TO SAVE
BAY AREA HOSPITAL
AND ENSURE LONG-TERM RESILIENCY
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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Emergency Board Request: $10 million
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 $10 million liquidity infusion will provide a critical runway, materially reducing the risk that the Bank of Montreal exercises its legal right to call the Hospital’s $45 million note and protecting the turnaround now underway.
Before the restabilization plan, the Hospital was projected to lose $24 million in FYE June 30, 2026. Thanks to aggressive measures already in motion, current projections show an $11 million loss for FY26, with operating break-even achievable by FYE June 30, 2027. This $10 million bridge will pull that timeline forward by a full year, driving near break-even operations by FYE June 30, 2026.
The funding will 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 our aging population — while providing insurance against deferred capital needs, including potential replacement of aging cardiac catheterization labs, and preserving essential services as long-term strategic partnerships are pursued.
THE SHORT VERSION:
The Bay Area Hospital is seeking $10 million from the Emergency Board to provide one-time bridge financing to accelerate implementation of the Hospital’s restabilization plan.
Will the Hospital be sustainable after this?
Yes, depending on whether this Restabilization Plan is able to be carried through. See the Hospital’s turnaround plan and projections.
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Refinancing and Buy-down
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 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 legislation that 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 to this legislation, the Bay Area Hospital will seek to immediately buy down some of the outstanding debt via receipt of Lottery Bonds.
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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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.
THE PLAN:
[download link]
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What’s the alternative?
What will the Hospital look like if we simply do nothing?
Inquiring as to consequenses and opportunity costs is part of any prudent legislative inquiry. In this case, the alternate course of action is planned out and, though not preferable, ready to be implemented.
Without the requisite public assistance, the Bay Area Hospital will:
Downgrade its status to a Type A or Type B Hospital,
Reduce its 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 a significant reduction of staff and expenses, and dangerously force many residents to travel to Roseburg or Eugene for critical services. In addition to the impact on patient care, cutting staff on this scale would significantly impact one of the area’s largest sources of good jobs at the worst possible time for our community’s economic recovery.
