Christina,

Unfortunately, I cannot be of much help without some photos. I'd like some that clearly capture any fungal/mushroom growth as well as the hole you mentioned. Also, a photo of the base of the tree and the surrounding area would be helpful.

The picture of the lichen/moss is less pressing, as most trees do fine with them on their bark.

Best,

Shane

Christina,

Sounds good, you can resubmit your question once you get photos. In the meantime, here are some common mushrooms that can grow on oaks, it isn't an exhaustive list, but I've personally seen all of these in MN with the exception of reishi:

1. Armillaria root rot (honey mushrooms)
2. Inonotus dryadeus (weeping polypore/conk)
3. Ganoderma applanatum (artist's conk/bracket)
4. Ganoderma sessile (reishi mushroom)
5. Laetiporus spp. (chicken of the woods)
6. Polyporus squamosus (dryad's saddle/pheasant back mushroom)

Any of these mushrooms are not great to find on living trees, especially the first two. 

Best,

Shane

OK, chicken of the woods can be variable with oaks in terms of how bad the prognosis can be. I would recommend contacting a certified arborist who can see the extent of the rot in the tree.

Best,

Shane