Opinion: Enforcement challenges and an alternative for Oregon’s health care merger review program

When enacted in 2021, Oregon’s effort to tame the impact of abusive health care market practices through a two-stage antitrust review and enforcement strategy was widely heralded as an important innovation in state regulation. After three years of operation, it has become increasingly clear through the approval of more than 30 consolidation applications that significant flaws in the design, management, and leadership of the Oregon Health Care Market Oversight program (HCMO) have impeded efforts to safeguard health care costs, quality, access, and equity.

Simply put, the program reviews significant health care mergers or acquisitions such as hospital purchases of physician practices, which can have direct impacts on the care provided to Oregonians.

In late 2025, Oregon HCMO leadership opened a public engagement period in anticipation of a regulatory update and in response to vocal concerns about enforcement and regulatory governance. That advisory process is taking place right now.

HCMO’s invitation evoked intense response. Many commentators concluded that oversight of the market, using HCMO’s arsenal of risk-assessment, impact analysis, prior merger approval, condition-setting, and compliance tools, had yet to achieve the public protections sought by the Legislature.

Here, I discuss three major implementation challenges faced by the Oregon HCMO program. I then conclude with a note about a state-level enforcement approach that was successful in an entirely different context — predatory lending — and suggest why something similar might be appropriate here.
 

Selected enforcement challenges

Information: Information is the quintessential element of the HCMO merger review strategy. Complete and accurate information is essential in order for HCMO to spot and measure merger risks and to analyze their potential impact across the four domains specified by the Legislature.

A review of public comments and a substantial sample of HCMO merger transactions in September 2025 showed that HCMO did not consistently use its statutory authority to obtain requested data, probe merger applicants for explicit explanations instead of aspirations and generalities,  and require parties to respond to data requests. Commenters concluded that in some cases information barriers were responsible for overlooked and under-assessed risks that could have been avoided with more aggressive data collection.

HCMO’s reluctance to question applicants’ claims of trade secrecy and make use of “public interest” overrides when necessary deprived competitors, payors, consumers, and other interested parties the opportunity to examine merger applications in detail and to contribute meaningful public comments. This also precluded meaningful independent  oversight by statutorily created Community Review Boards.

Merger approval criteria and condition-setting:  During its first three years, HCMO did not disapprove a single merger application outright. Had it done so, frustrated applicants would certainly have challenged HCMO for arbitrary behavior: a failure to adopt clear standards and objective metrics as the necessary predicate for regulatory enforcement.

A careful review of transactions, rules, and analytic frameworks supports the view that HCMO has not adopted a clear theory of harm; one that connects the characteristics of excessive consolidation with alleged injuries to cost, quality, equity, and access.

Although HCMO asserts that it “will seek to apply consistent and standardized metrics to health plan...performance and potential impacts in each domain”, there is little evidence that it has succeeded. More often than not, HCMO’s findings and determinations read as head-scratching conclusions which pair unsupported findings with conflicting facts. In one typical example, HCMO concluded that it “does not have specific concerns about the impact of this transaction on consolidation” having just reported that the market is highly concentrated and that if approved, the transaction would result in significant further concentration.

HCMO has considerable discretion to apply conditions as a predicate for approving merger applications. Conditioning provides a flexible way to avoid outright rejection and offers a method for tailoring an effective solution to a well-defined problem. HCMO has had mixed success with this type of conditioning strategy. In some instances where the program is well informed about the nature of consolidation threats, it has configured appropriate fixes. Where the risks are more opaque and applicants’ specific business plans and intentions are enshrouded in trade secret protections, conditioning may not be so effective. This has been a special problem for transactions involving private equity investors.

Resources and leadership: Administration leadership, including the Governor’s and Attorney General’s Offices, have never fully bought into the merger review approach. Instead, they have starved and ignored it from a resource, legal, and political standpoint and have allowed it to flounder instead of finding constructive ways to strengthen its performance.

The Legislature made the incorrect assumption that the Kotek administration and HCMO regulators would opt to govern the program aggressively. But that prediction was anomalous to the traditional consensus-seeking identity of Oregon’s regulatory culture and never fully materialized.

The Governor’s Office has not backed sufficient funding from the state general fund nor from industry user-fees. HCMO’s budget has been level-funded and its enforcement impact has been hobbled by the growing volume of increasingly complicated review transactions placed on its agenda. Funding constraints have also compromised the program by forcing the HCMO team to review complex merger proposals on an unrealistically accelerated, low-budget time schedule.

The failure of the Governor’s Office to address mergers and market protection as a public policy priority has undermined HCMO’s credibility and discouraged program managers from stepping up their game. Even during the controversial OHSU-Legacy transaction, top state leaders failed to provide a useful perspective on the systemic implications of the merger and the head of HCMO’s parent agency did not identify market oversight as a priority concern of her agency.

Elsewhere in Oregon’s state government quadrangle, the AG’s Office does not have extensive antitrust or consumer protection litigation experience. It has shied away from rigorous anti-monopoly enforcement strategies, seemingly to protect itself from adverse litigation results, costly lawsuits, and industry criticism for hiring external experts at industry expense. Recent court decisions upholding the HCMO statute and providing exemptions from industry trade secrecy claims should reinforce the AG’s willingness to lend support to a more active regulatory posture at HCMO. We await developments.
 

An alternative approach

The current HCMO framework is built around a time-consuming, fact-specific review of individual merger applications, subject to a largely qualitative evaluation of risks in four statutory domains. The core assumption, well-supported by literature and experience, is that unfavorable outcomes relating to cost, quality, access, and equity, are associated with excessive levels of market concentration.

That said, the analytic framework does not provide much evidence about the degree of concentration normally required to cause harm in any or all of the statutory domains. Nor does it indicate whether some domains are more sensitive to concentration than others. This shortcoming represents an important impediment to robust market oversight enforcement.

Ideally, a regulator charged with assessing risks and disapproving individual merger proposals would like to have a validated theory of harm, evidence-based criteria for establishing a presumption of injury, the data needed to apply the criteria to individual cases, and a means for arriving at an equitably balanced and sustainable decision. The HCMO program falls short in various of these dimensions.

In the run-up to the 2008 financial crisis, Massachusetts, among other states, faced similar regulatory challenges. In the Commonwealth, a number of Massachusetts homeowners purchased subprime mortgages from Fremont Investment and Loan. Based on consumer complaints, the state AG launched an intensive investigation that provided evidence of Fremont marketing adjustable-rate loans whose financial terms and conditions were unsuitable to borrowers and were designed to fail after the lender and associated securitizers had garnered significant profits.

Based on its fact-gathering, the AG framed a complaint and petition for injunctive relief based on a theory of “unfair” conduct. A key objective of the lawsuit was to demonstrate to the court that Fremont’s business practices violated state consumer protection and that an entire class of Fremont borrowers represented by the attorney general were entitled to relief without a need to provide individualized facts and to litigate individual cases.

In a court hearing, the AG presented her theory of structural unfairness and demonstrated that all borrowers with a Fremont subprime adjustable mortgage containing four enumerated risk factors experienced foreclosure. After some controversy over details, the trial court and subsequently the state supreme court found in favor of the AG. The result, a landmark principle of structural unfairness was established and used in subsequent matters in and out of the mortgage sector.

From the attorney general’s perspective, the Fremont case was of vital importance because it established a general rule that could be exported and adapted in other contexts. It served as a deterrent in future cases of unfairness in the Commonwealth. It was pragmatic, and in the long term it provided a lower cost solution than prior attempts to litigate individual cases.

The Fremont decision was captured in rules adopted by the attorney general and formed a basis for legal enforcement. The administrators of HCMO might wish to consider parallels between the two situations. HCMO might want to fashion an expanded investigation in a significant comprehensive-level case, take advantage of external experts funded by applicants to learn if and how business models and practices contribute to detrimental risks, explore connections between risk factors and concentration-related outcomes, and draft a generally applicable rule analogous to unfair practices in subprime lending.

Although the Oregon and Massachusetts situations are different, they overlap in ways that suggest why lessons learned in one jurisdiction can sometimes be shared profitably across states and contexts. With a HCMO rulemaking update in the wings, putting this lesson on the agenda now is timely and, hopefully, productive.

Larry Kirsch is an economist whose work has focused consumer protection, health care, and financial services. He served as Deputy Commissioner and CFO of the Boston Department of Heath and Hospitals, chief health economist at The Segal Company, and Managing Partner of IMR Health Economics. He has co-authored two books dealing with the Consumer Financial Protection Bureau and has participated extensively in state and federal health care financial regulation and litigation.