After six months of lengthy applications, hundreds of public comments and a series of state reviews, Salem Health and Santiam Hospital will close on their $61-million merger by Aug. 31.

While the two Marion County hospitals have been mulling the merger for over a year, they only recently got the green light from state agencies. Beyond the dollars, merging the hospital systems will be a lengthy process, combining insurance agreements, workforce structures and decision-making boards.

The hospitals first filed for review by the Oregon Health Authority in February. That review was halted in early July when the hospitals sounded the alarm over Santiam’s finances and asked for an emergency exemption from the process.

Health officials granted the emergency request on July 31, meaning the merger only needed Oregon Attorney General Dan Rayfield’s sign off to move forward.

His approval came Friday, Aug. 7, just two days after the Oregon Department of Justice held a public hearing to get feedback on the merger. While that hearing drew unanimous support, some people who wrote to the department felt different.

“A small minority of commenters voiced concerns regarding the affiliation, including worries about increased market concentration, higher costs, disputed claims of financial urgency, patient care issues, workforce strain, limited referral options and calls for full regulatory review,” said the justice department order approving the merger.

The deal is in the public’s interest and is “likely to maintain or improve” healthcare access, according to the order. Rayfield’s decision means the hospitals can combine their systems without the health authority’s oversight or state-imposed conditions.

Santiam Hospital & Clinics includes the 40-bed Santiam Hospital in Stayton along with 13 clinics in the Santiam Canyon. Salem Health, meanwhile, dwarfs Santiam with a system that includes Salem Hospital, West Valley Hospital and 27 clinics in Marion and Polk counties.

Upon closing, Santiam will become Salem Health’s third hospital and adopt the name, “Santiam Hospital, Salem Health Hospitals & Clinics.” Salem Health will also absorb Santiam’s clinics, expanding its reach into eastern Marion County and Linn County.

Salem Health plans to infuse at least $61 million into Santiam under the deal. That handover will happen in two phases, according to a recent filing from the hospitals.

In the first phase, Salem Health will help Santiam get its head above water by supporting the day-to-day operations, paying off its $22 million in debt and funding a new multi-million-dollar electronic health record system.

Salem Health plans to cover the “immediate $26 million needed” to buy and implement that record system, according to the filing. That price tag, however, is much higher than earlier estimates hospital officials gave to the health authority.

The second phase will help Santiam develop long-term financial stability over several years through operational changes and investments into its services and capital projects.

“Salem Health has the operational expertise, financial clout and turnaround experience necessary to ensure that Santiam Hospital survives and thrives for decades to come,” the filing said.

Hospital leaders previously identified Santiam’s maternity department, in-house ambulance service and budding Mill City pharmacy as priority areas for investment.

Salem Health is well-positioned to make those investments. According to the filing, the organization has “in excess of $1 billion in liquid cash and investment reserves.”

One insurance provider repeatedly came into conversation during the health authority’s review: Regence BlueCross BlueShield. The insurance is out of network at Salem Health but in network at Santiam until at least June 2027.

Salem Health officials will soon be able to review Santiam’s agreement with Regence and other payers – something they weren’t able to do prior to closing.

“At closing, Santiam will remain in-network with all payers for whom Santiam was in network immediately prior to closing,” the hospitals said in their initial application for review. “Salem Health will determine how to address Santiam’s various payer contracts post-closing on a case-by-case basis through direct engagement with the payer.”

Under Salem Health, many Santiam employees, including nurses, will see their pay increase, according to the early application. Santiam employs over 700 people, making it the largest employer in the canyon.

Each Santiam employee will be offered employment under Salem Health and to transition payrolls.

“While we are still determining the time of transitioning employment, we can confirm that all Santiam employees will be offered employment at Salem Health,” said Salem Health spokeswoman Megan Allison.

Soon, two of Santiam’s nine board members will join Salem Health’s board of directors, which currently includes 13 people. Those two people will have voting power at Salem Health, while back in Stayton, Santiam’s board will transition into an advisory role.

“The full integration of the organizations into Salem Health will happen over time,” Allison said. “Santiam and Salem share a culture that is committed to high-quality local healthcare. We are dedicated to being partners in community health and will share more as this work continues. “

Contact reporter Hailey Cook: hailey@salemreporter.com .

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