Patients in the Santiam Canyon would have better maternity care, one shared medical record and better-staffed medical clinics under a proposed deal between Salem Health and Santiam Hospital Clinics, according to a newly-released state filing by the health care organizations. For the next month, Oregon Health Authority officials will weigh the proposed merger between the hospitals. They could greenlight the deal outright, approve it with conditions or decide it needs a deeper look. The 30-day clock could pause at any time if state officials need more information from the hospitals. The two Marion County nonprofit hospitals first filed their proposal with the state in mid-February. It was published online Thursday, April 16, marking the official start of the review process. If approved, Santiam will be absorbed into Salem Health’s network, becoming “Santiam Hospital, Salem Health Hospitals Clinics.” The Salem Health system presently includes two hospitals and 27 clinics in Marion and Polk counties.  Hospital leaders are hoping to have the state’s go-ahead by Sept. 30. Why merge? According to the filing, declining reimbursement rates, increased salaries and benefits, a changing population, workforce shortages and impending federal Medicaid cuts “threaten Santiam’s narrow operating margin,” and drive the need for the deal with Salem Health. On its own, Santiam does not have the money to invest more into services like maternity care or to strengthen its workforce by paying more competitive wages. The Oregon Health Authority is accepting public comment on the proposed hospital deal. Comments can be made by email to [email protected], voicemail at 503-945-6161 or through an online public comment form. “Given Santiam’s current financial condition, its board and executive team have determined that it must find a partner to ensure its long-term viability. Thus, if this affiliation does not close, Santiam would likely pursue additional efforts to find a nonprofit health system partner that can help stabilize financial reserves and give Santiam a favorable growth trajectory. The financial condition of other in-state health systems makes an out-of-state partnership more likely,” the filing says. If approved, Salem Health would infuse $61 million into Santiam over the next decade, with $10 million of that paid upfront for immediate upgrades. The deal has prompted concern from some local patients about competition and consolidation in local health care services. In the filing, the hospitals argue that’s a non-issue.  “This transaction will not have a material impact on competition. Santiam’s market share is just 3.1%. Both systems operate within a diverse and competitive healthcare environment that includes multiple other hospitals and health systems serving adjacent and overlapping service areas. The affiliation is therefore not anticipated to impact patient choice, service availability, or competitive dynamics,” the filing says.  The future of patient care Salem Hospital has 644 beds that are often in high demand. The hospital’s 436 adult health and critical care beds were about 88% full daily between January and March of this year, Salem Health spokeswoman Megan Allison said in an email.  Santiam Hospital in Stayton has 40 beds, many of which regularly go unused. Only about 13 of its beds are in use daily, the filing showed. That’s often because of staffing shortages. Less seriously ill patients using Salem Health beds could be transferred to Santiam under the deal. On average, 26 patients a day from Santiam Canyon are being cared for in a Salem Health bed.  About 250 Santiam patients are transferred from Santiam annually to another hospital “for services that could be delivered closer to home,” the filing said.  The hospitals want to make better use of Santiam’s beds by growing its services, reducing unnecessary transfers and encouraging patients in the canyon to stay local. “Coordinating bed capacity across our health systems will help maximize access for patients in both Salem and the Santiam Canyon,” Allison said. One immediate upgrade at Santiam will be the installation of a $4 million electronic records system that would combine patient records between the hospitals. The filing called the system upgrade at Santiam “urgent.” Although the hospital’s current record system is contracted through 2027, that transition needs to begin sooner, Santiam spokeswoman Melissa Baurer said in an email.  A combined system means patients would have one medical record between Salem Health and Santiam, Baurer said. The timeline for that integration has not yet been decided.  Maternity is another area that would see investment at Santiam. The filing said “many Santiam Canyon residents currently leave the community for basic maternity services.” “Santiam’s maternity program is already a high‑quality, patient‑centered service and demand for care continues to grow,” Baurer said. “Growth is needed to strengthen staffing support, expand access to specialty providers, and ensure more families are able to welcome their babies in the community where they live, close to home.” The hospitals also identified Santiam’s ambulance service and its Mill City Pharmacy in development as investment priorities.  Marrying two hospitals Internally, the process of merging the two hospital systems will be a long one, combining insurance agreements, workforce structures and decision-making boards.  Santiam has over 600 employees and sees about 60,000 patients annually. The system includes 13 clinics, in addition to the Stayton hospital.  Salem Health’s workforce is 10 times that of Santiam’s, with over 6,000 employees. It is the city’s largest private employer and serves about 185,000 patients a year.  “Together we are preparing to integrate the complex systems of these two hospitals. This is a long process that will occur well beyond the Sept. 30 closing date,” Allison said. The hospitals each have their own insurance contracts with payers. Those agreements are highly confidential, the filing said, so Salem Health has not been able to review Santiam’s contracts.   “There have been no discussions about the disposition of specific contracts. However, Salem Health has no plans to terminate any payer contracts at closing,” the filing said. The most prominent insurance in these discussions is Regence BlueCross BlueShield, which is in network at Santiam through June 2027, but has been out of network at Salem Health since 2025.  “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,” the filing said.  Insurance companies often set different reimbursement rates for different hospitals, the filing said, even for those within larger health systems like Salem Health. Therefore, even if insurers switch to contracts that cover all Salem Health facilities, “it is expected that most will execute a Santiam-specific addendum.”   Santiam is seeing more people leaving their jobs than it did before Covid, with a turnover rate 21% in 2025. The filing largely cited statewide wage hikes for the increased turnover. What’s more, the rural hospital cannot afford to pay workers as competitively as a larger system, the filing said.  The deal would transfer Santiam’s employees to the Salem Health pay scale, meaning current and future Santiam employees would get higher pay. Salem Health has about 13% turnover.  Santiam employees would also be trained in Salem Health’s lean management system – a method focused on continuous improvements and reducing waste.   Santiam’s board would become an advisory board, though two of its members would join the Salem Health board of 13 and have voting power.  Previous coverage: Salem Health and Santiam Hospital file with state to merge Salem Health, Santiam Hospital will seek state approval for merger Salem Health in talks to acquire Stayton hospital  Salem Health merger talks trigger concerns over insurance coverage Have a news tip? Contact reporter Hailey Cook: [email protected] . 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