The Ashland City Council unanimously approved the first step in a merger between Ashland Community Hospital and Asante Health System on Tuesday night.
Councilors approved a letter of intent to affiliate that details terms of the planned merger.
Without the merger, ACH could go bankrupt or close because of financial difficulties. Among other issues, Medicare and Medicaid reimbursement rates are not keeping pace with ACH's costs to provide care, according to hospital officials.
"We need a partnership such as this sooner rather than later," said Councilor Dennis Slattery, who is on the team representing Ashland in the merger talks with Asante. "This hospital is in critical need of a partnership."
Slattery said Asante, which is based in the Rogue Valley, will be a good local partner for ACH. He said he has become convinced that Ashland's hospital cannot survive on its own.
Councilor Rich Rosenthal said a merger will help ensure that Ashland continues to have a hospital in town.
"The bottom line is we want a hospital in Ashland," he said.
Roy Vinyard, president and chief executive officer of Asante, said Asante would like to emphasize ACH's strengths, including its birth center, wound care center and retinal surgery services.
At the same time, Asante could bring more medical and surgical services to ACH, Vinyard said.
ACH has abundant surgical facilities, while the Rogue Regional Medical Center in Medford — which is part of the Asante network — lacks adequate surgical facilities, he said.
With a merger, ACH will be able to benefit from economies of scale in areas such as finance, human resources, purchasing and implementing electronic medical records, Vinyard said.
Asante also can aid in physician recruitment, he said.
Vinyard acknowledged that uncertainty lies ahead for ACH's employees.
"We realize this is a tense time for employees," Vinyard said, but added that Asante will try to keep ACH employees in Ashland or offer them available jobs in the Asante network, which also includes Three Rivers Community Hospital in Grants Pass and Asante Physician Partners, an organization to coordinate patient care inside and outside of hospitals.
With 400 employees and a $25 million annual payroll, the hospital is Ashland's third largest employer and provides the highest average wage, according to ACH.
The next step in the merger negotiations will be to create a definitive agreement, which will take 60 to 90 days, and have all the affected parties sign that agreement.
As part of the merger, the city will hand over its ownership of ACH to Asante, while Asante will take on ACH debt, including construction debt and pension obligations.
In past decades, ACH was a city department before being spun off on its own.
Staff reporter Vickie Aldous can be reached at 541-479-8199 or firstname.lastname@example.org.