Peace Harbor’s money woes: Real or manufactured?

by Marty Wilde

PeaceHealth has an unfortunate history of using black-box budgets to justify its actions.

Consider Sacred Heart University District, where it reported a $14.6 million operating loss in 2018 for the facility. As it relocated inpatient services to RiverBend, the reported loss grew to $40.1 million by 2020. In 2021, a new line appeared on the state filings, carrying a $72 million charge. In 2022, it was $74 million.

In August 2023, PeaceHealth announced it would close University District, citing unsustainable losses.

Asked what changed in 2021 about how that hospital’s costs and charges were reported, PeaceHealth provided an incomplete answer. It described why the hospital lost more money, citing COVID-era reimbursement shortfalls, patients on the psychiatric and medical units who stayed past 30 days and could not be discharged anywhere appropriate, and the cost of travel nursing.

Those pressures were real. None of them explains why $72 million in charges moved onto a line that had not existed the year before.

PeaceHealth is now reporting a large loss at another Oregon hospital.

For the fiscal year ended June 30, 2025, it told the state of Oregon that its hospital in Florence, Peace Harbor, lost $20,375,456. For the same twelve months, it told Medicare that the same hospital earned $127,494.

The revenue lines agree, but the expense lines differ by $20.6 million. The two forms define operating expense differently and a hospital can file both in good faith.

Notably, Cottage Grove shows the same split, reporting $10.4 million of income to Medicare and a $1.5 million loss to the Oregon Health Authority. I asked the system to explain that accounting.

PeaceHealth responds

As corporate and shared services costs were the biggest unexplained item, I asked how they get assigned to individual hospitals.

PeaceHealth answered that system overhead, which covers information technology, quality and patient safety, human resources, security, legal services and more, is allocated to every hospital and clinic as a percentage of net patient revenue. The size of each facility’s revenue base, PeaceHealth wrote, is what explains the variance between facilities.

There are sound, legal reasons to assign more costs to critical access hospitals, as Medicare pays on a cost basis for these facilities. But PeaceHealth doesn’t assign the same percentage to each of their critical access hospitals.

Their four large hospitals cluster around 20% and their three critical access hospitals outside Oregon are only slightly above that at about 23%. But Florence and Cottage Grove—the only critical access hospitals in PeaceHealth’s system in Oregon—are charged at about 35%.

These higher rates are sustained over time. Peace Harbor was charged 33.8% in fiscal 2023 and 31.0% in fiscal 2024. Cottage Grove ran 35.8% and 34.8% across the same two years. PeaceHealth’s hospital in Ketchikan, Alaska, which is about as remote as an American hospital gets, has never been charged above 24.3%.

Peace Harbor versus other Coast hospitals

PeaceHealth gave three reasons for its higher expenses at Peace Harbor:

• Florence sits in a coastal labor market where wages run higher.
• Peace Harbor provides surgical services that many critical access hospitals, Cottage Grove among them, do not.
• Its payer mix leans harder toward Medicare, about 65% of patients, against roughly 50% at Cottage Grove.

These are true, but they describe conditions shared by most of the Oregon coast.

Peace Harbor’s collection rates are similar to other hospitals. It collects 54% of what it charges, above the coastal median of 52.3%. Payroll runs 42.9% of its operating expense, which falls in the middle of the pack.

Columbia Memorial in Astoria is just as isolated and just as coastal. It spends more per adjusted patient day, collects less of what it bills, and still reported a positive margin. Adventist Health, Samaritan and Providence each run coastal critical access hospitals in Oregon. All are in the black.

Three unanswered questions

PeaceHealth lost the public trust with its black-box budgeting at University District. Providing us with answers to three questions would go a long way to convincing us that it’s not planning a repeat performance at Peace Harbor.

Why is the allocation to Peace Harbor and Cottage Grove so high?

PeaceHealth should publish the allocation rate it applies to each facility and the basis for the difference. It’s worth noting that the excess above what they assign their large hospitals is roughly three quarters of the operating loss at Peace Harbor. It is also unusually high within the PeaceHealth system, and it is entirely within PeaceHealth’s control. If there is a reason Florence and Cottage Grove are charged half again what Bellingham and Vancouver are charged, the public deserves to know why. After all, many Coast hospitals are actually profitable.

Why are the numbers so different in the reports to Medicare and the state?

The state controls the system that permits hospitals to operate and it’s being told that Peace Harbor is hemorrhaging money. Different methodologies are permissible, but it’s something of a black box to a public that has been burned before.

Is it executive compensation?

In the fiscal year Peace Harbor reported a $20 million loss, PeaceHealth reported $25,070,444 in compensation for officers, directors, trustees and key employees, up 18.4% in a year. That raises some questions, especially regarding compensation for service on a nonprofit board, which is unusual.

To its credit, PeaceHealth has stated that it is not actively considering curtailing services at the Coast. It meets its requirements for community benefit. But it hasn’t explained Peace Harbor’s losses compared to the better performance of other, similar hospitals.

It also matters beyond the Coast. PeaceHealth wants to operate a rehabilitation hospital and a psychiatric hospital in Lane County, and it will run both with Lifepoint Health, a for-profit chain that Apollo Global Management bought in 2018. The structure deserves a look. PeaceHealth’s own tax return reports that it owns 60% of the rehabilitation venture and 51% of the psychiatric one, but it is the managing partner of neither. PeaceHealth holds the majority stake in both ventures and runs neither.

The psychiatric hospital’s projections carry a management fee of 5% of net revenue, which runs from about $1.1 million in the first year to $2.6 million in the fifth, paid to an unnamed manager.

PeaceHealth told the state the new hospital will cost less to operate than the 35-bed unit it replaces, partly because of reduced hospital overhead. That is PeaceHealth’s own filing, submitted to win an approval, saying its overhead raises the price of care.

The public deserves better answers than it has received if the taxpayers are to continue to provide the subsidy PeaceHealth receives through its nonprofit status.

Copyright 2026 Marty Wilde, All Rights Reserved. Broadcast and reprinted with written permission of Marty Wilde.

Marty Wilde represented central Lane and Linn counties in the Oregon legislature. For more of his Letters From a Recovering Politician, subscribe at https://martywilde.substack.com/subscribe.