Feds and states aim to bolster healthcare merger and acquisition oversight
The Oregon legislature passed a bill that would bolster healthcare merger and acquisition oversight, with a focus on preserving services for underserved communities.
Oregon regulators would have to sign off on any merger, acquisition or affiliation that would increase a healthcare organization’s net patient revenue by $1 million or more. The Equal Access to Care Act would apply to healthcare entities that reported at least $25 million in net patient revenue the three years preceding the proposal.
The Oregon Health Authority could deny a transaction if the involved parties couldn’t show that the transaction would reduce patient costs, bridge health inequities or increase access to certain services, such as tubal ligation, abortion or contraceptive counseling. If the transaction closes, the involved parties would show policymakers and an advisory council that they’ve complied with the terms one, two and five years after it closed.
“There are some reproductive health deserts in Oregon,” said state Rep. Andrea Salinas, a Democrat who sponsored the bill, noting that some patients along the Oregon coast have to drive about two hours inland just to get a pap smear. “If a transaction would reduce these services, we would want to know.”
If a healthcare entity would close without the merger or affiliation, state authorities would look at the transaction more favorably, Salinas added. But if companies are solely trying to profit from the healthcare system, the legislation is designed to stop it, she said. Gov. Kate Brown is expected to sign the legislation this week.
“When large healthcare companies are buying up their competitors and posting record profits—in the middle of a pandemic—that’s a problem,” Christel Allen, executive director of NARAL Pro-Choice Oregon, said in prepared remarks. “We applaud our leaders for tackling this issue head on, creating a process that puts health equity—not profits—at the center of mergers and acquisitions.
The Oregon Association of Hospitals and Health Systems criticized the bill, arguing that it will lead to more rural hospitals closing and discourage hospitals and clinics from forming partnerships “to provide better care for patients and enhance services.”
State and federal regulators have tried to clamp down on anticompetitive mergers and acquisitions, which are often linked to higher prices, research shows. Some merged entities wind down services due to a change in ownership or financial considerations, which have soured deals.
“One reason for dissolution of some mergers are about access to reproductive services when the parent (company) is affiliated with a Catholic health system. Clearly, that was a factor in Yakima Valley (Virgnia Mason) and potentially one with Hoag (Providence),” Bill Kramer, executive director for health policy at the Purchaser Business Group on Health, told Modern Healthcare in May. “Large systems can also buy financially distressed community hospitals and selectively withdraw services that are less profitable.”
A similar bill was proposed in California, SB 977, but it stalled late last year before reaching the Assembly or Senate. It would have required the state attorney general to sign off on any healthcare provider transaction exceeding $1 million, contingent on the organizations’ proof that the deal would have decreased costs or improved access.
On the federal front, Sen. Amy Klobuchar (D-Minn.) co-authored a bill that recently passed the House Judiciary Committee, which would bolster antitrust enforcement.
It would add $300 million to each of the Justice Department and Federal Trade Commission’s budgets, increase merging filling costs for the largest transactions, update the standard for permissible mergers, shift the burden of proof to the merging parties, establish an independent division to conduct market studies and merger retrospectives, and prohibit exclusionary conduct like all-or-nothing contracts, among other provisions.
“That’s complementary (to the Oregon bill), especially since they can look at consolidation at a more global scale including interstate transactions,” Salinas said.
Antitrust regulators have also asked health insurers for claims data as they study the impact of physician consolidation, particularly when hospitals acquire physicians. Hospitals and health systems often acquire smaller physician groups in deals that fall under regulators’ radar.