They carry a region.
In 2025 the three hospitals reported 1,877 births and 93,221 emergency visits between them. The state lists all three as Level III trauma hospitals.
A practical proposal for Oregon
Protect the care a region depends on.
Too big to be small. Too rural to be big.
Three hospitals serve wide rural regions of southern Oregon. Oregon has a cost-based payment method for its small rural hospitals. These three are too large to use it.
This project proposes a state designation for hospitals like these, and a lawful way for money to follow it.
Take the policy brief with you (PDF)
A proposed state designation. The policy and financing choices remain open for review.
Bay Area Hospital
Coos Bay. Operated by a public health district.
- Births, 2025
- 568
- Emergency visits, 2025
- 27,969
- Trauma level
- Level III
Mercy Medical Center
Roseburg. Part of CommonSpirit.
- Births, 2025
- 677
- Emergency visits, 2025
- 34,593
- Trauma level
- Level III
Sky Lakes Medical Center
Klamath Falls. An independent nonprofit.
- Births, 2025
- 632
- Emergency visits, 2025
- 30,659
- Trauma level
- Level III
Calendar 2025 public reporting. Sources: OHA hospital reporting, Databank 2025; OHA trauma hospital list. Three hospitals and the communities around them. A reference to a hospital or other organization describes public information and does not mean that it has joined this project or endorsed its proposals.
The problem in one minute
They are too big for the small-hospital rules.
Oregon’s small rural hospital categories stop at fifty beds, and the law gives those hospitals a cost-based payment method for fee-for-service care. Each of these three is licensed for more than fifty beds.
Their communities depend on public coverage.
In Coos, Douglas and Klamath counties, 56 to 58 percent of residents have public health coverage. That is a county figure, and public coverage includes more than Medicaid. It is not a hospital’s own mix of patients.
Too big to be small, too rural to be big.
Putting out a fire does not fix the foundation.
The fire
In 2026 the Legislature passed HB 4075. It provides a conditional state guarantee for a qualifying hospital’s refinancing or cash shortages, with an April 1, 2027 deadline.
The foundation
A guarantee is not recurring reimbursement for care. The question is whether the payment system supports the services the region needs over time.
Did Bay Area already receive a new Medicaid rate through HB 4075? No. The act concerns a qualifying loan guarantee.
Eleven years of audited operating margins
Operating margin in percent, fiscal years 2015 through 2025. Whole-hospital results, not Medicaid-only results.
- Bay Area Hospital
- Mercy Medical Center
- Sky Lakes Medical Center
Show the numbers
| Fiscal year | Bay Area Hospital | Mercy Medical Center | Sky Lakes Medical Center |
|---|---|---|---|
| 2015 | +6.6 | +12.6 | +9.5 |
| 2016 | +4.4 | +13.3 | +8.6 |
| 2017 | +6.2 | +10.5 | +3.3 |
| 2018 | +5.4 | +7.8 | +4.7 |
| 2019 | +3.5 | +2.5 | +4.2 |
| 2020 | +0.1 | +9.5 | +3.9 |
| 2021 | −4.6 | +5.2 | +1.6 |
| 2022 | −33.2 | +7.5 | +1.2 |
| 2023 | −15.8 | +2.8 | −0.9 |
| 2024 | −2.8 | +5.6 | +0.6 |
| 2025 | −10.4 | +1.1 | −3.3 |
A single year can mislead in either direction. The series shows the direction of each hospital’s reported results without explaining their causes, which can include payment, volume, staffing, one-time items and accounting choices. Bay Area and Mercy’s reporting years end in June, while Sky Lakes’ ends in September. Source: OHA audited financial data, FY 2025 hospital rows.
Start with what the region needs. Build the support around it.
A hospital’s bed count does not, by itself, tell us which services a region would lose, where patients could go, or what maintaining access would require. The proposal puts those questions at the center of policy design.
Recognize the rural hospitals that carry a regional load. Connect that role to lawful financing. Measure what reaches care.
Recognize
Make the regional role visible.
Use objective criteria and verified service information to identify the hospitals and regional functions the policy is meant to support.
Finance
Give the designation a path to resources.
Pair lawful, available funding with a payment method that can be authorized and put into operation. A designation alone does not make a payment.
Deliver
Count the result the hospital retains.
Measure new receipts and substantiated savings after contributions, displaced payments and delivery costs. Show when the benefit can arrive.
A local hospital can hold a regional system together.
A keystone holds an arch together. The project uses that image for a rural hospital whose services support surrounding clinics, emergency crews, smaller hospitals and patients who cannot readily travel farther for care.
A Systemically Important Rural Hospital designation can give that work a durable structure—if the definition, financing, payment route and accountability are designed together.
The proposed project mark. “Keystone hospital” is a public explanation of the idea; Systemically Important Rural Hospital is the proposed designation. Neither is an existing federal status.
Choose the scope. Test what it can deliver.
The working drafts range from designation alone to designation with a study, a publicly funded pilot, targeted payment protection or an allowable-cost payment target. Each has two eligibility versions. No level is adopted or funded.
This work can support other hospital strategies. A common baseline makes it possible to compare proposals, identify what each adds, and avoid counting the same benefit twice.
Designation alone
Define and certify the hospital class; create no payment obligation.
Designation and study
Add an OHA study reporting in 2028.
Publicly funded payment pilot
Add a pilot supported by a willing public entity, subject to lawful funds and required approvals.
Targeted payment protection
Add payment support limited to money appropriated for that purpose.
Allowable-cost payment target
Add a payment target and a General Fund formula for the first biennium, subject to legislative funding and applicable federal limits.
Two tracks have to meet.
A funding source answers where money comes from. A payment route answers how it can lawfully reach the hospital. Both have to work.
Track 1
The source
- Who owns the funds?
- County, district, public hospital, Tribe, state or other actual source.
- What makes them available?
- Authority, restrictions, budget, governing approval and a real commitment.
Track 2
The payment
- Which route fits?
- State payment, approved managed-care arrangement, education payment or direct support.
- What must it satisfy?
- Eligible costs and recipients, federal limits, approvals and operating terms.
Bring both tracks together
Implement, reconcile and report.Agency work · contracts · payment timing · records · accountability
Additional resources retainedfor a defined regional service or access function
Seven packages. Different jobs. Different conditions.
These are combinations of financing, payment and service support to test. They are not seven new pools of money, and their benefits cannot simply be added together.
- County public fundsA possible public contribution, limited by lawful use and local capacity.
- A health or service districtA durable local structure, with statutory, governance and election questions.
- Public-hospital expendituresQualifying governmental spending and records, under the applicable payment method.
- Tribal partnershipsDistinct transfer, care-coordination and support routes; Tribal choices govern participation.
- Behavioral-health service partnershipsDefined services and measurable avoided costs, reconciled with existing reimbursement.
- Residency and graduate educationAn existing education-payment framework to investigate; new eligibility and receipts are unconfirmed.
- Other local and project supportRestricted revenues, eligible service purchases and other support, each on its own terms.
A source can be legally possible and still unavailable in practice. The next work tests actual capacity, restrictions, approvals and hospital benefit.
From a proposal to cash
The calendar aims at a designation in 2027, subsequent financing and implementation work, and payment support in the 2029–31 budget. These goals do not promise passage, approval, a particular payment amount or a deposit date.
- Legislature / Governor
- Federal Medicaid
- Project goals
The next four weeks
November–December 2026
- November 18Revenue forecast
- December 1Governor’s budget; LC drafts due
- December 1–3Legislative Days
- December 11Presession filing deadline, 5 p.m.
The three-year view
2027
Long session
- January: work requirements*
- Oregon six-month waiver: through September 30
- October: tax limit falls*
Designation in statute. Then local financing and OHA groundwork.
2028
Short session
- January: grandfathered directed payments start phasing down*
Targeted fixes; financing and federal review work.
2029
Long session
- Financing phase-downs continue
Payment target in the 2029–31 budget.
Project goals are proposed; passage, approvals and payment dates are not promised. * The federal dates carry exclusions and conditions. The calendar page gives each one with its source.
What this project will not do
- Take existing CCO capitation or retained margin.
- Use education money.
- Reduce Oregon Health Plan services.
- Finance support through cuts to frontline pay or jobs.
A designation alone pays nothing. A funded proposal also needs a lawful source of money, a defined payment method, a plan for existing supplemental payments and an implementation plan.
Participation or endorsement by any hospital, legislator or public body is not implied.
Give three offices three clear questions.
Begin with information that already exists. Then select two or three designs for focused analysis. Draft requests are available for the member’s review and direction.
Legislative Fiscal Office
What would government need to spend and administer?
Map existing spending, federal exposure, agency work, systems, approvals and timing. Keep government fiscal effects separate from the hospital’s net benefit.
Legislative Revenue Office
Which public revenues are actually available?
Map the hospital assessment, local public finance, restricted revenues and transfer classifications. Identify capacity and limits before selecting a source.
Legislative Counsel
What must the policy say in law?
Test the class, designation, financing authority and accountability. Reconcile existing classifications and advise on drafting scope and timing.
The site provides draft requests. It does not establish that an office has received, accepted or completed them.
Follow the question that matters to you.
Understand the case. Test the mechanics. Advance the next work.
Start from where you sit
Turn a broad concern into a design people can test.
Agree on the regional function to protect. Establish the baseline. Test the source and the payment together. Advance the design that can show a lawful, measurable benefit.