This article has been expanded to incorporate additional reporting.
A federal appeals court has upheld an Oregon law letting the state approve or deny proposed health care mergers, rejecting a hospital group’s argument that the review process is too vague.
The July 3 ruling by a three-judge panel of the 9th U.S. Circuit Court of Appeals marks the second time Oregon’s Health Care Market Oversight program has survived a legal challenge from the Hospital Association of Oregon. The ruling affirmed a lower court ruling from May of last year.
For now, at least, the ruling addresses a major question swirling around an increasingly high-profile program that was approved by lawmakers in 2021. It was intended to address major health care industry consolidations that could result in higher prices, less competition, a decline in working conditions or reduced access to care — including reproductive health services. It does so by allowing state officials to conduct analyses, ask questions of applicants, hold hearings and, eventually, block transactions that were proposed.
Already, two very high-profile applications — mergers involving CareOregon as well as Oregon Health & Science University and Legacy Health — were scratched after the state started asking questions.
But while the ruling rebuffs the criticisms made by hospitals, the program has also sparked calls for further reforms to better achieve its aims of addressing research indicating that out-of-state chain ownership focuses on profits over patient care.
Some have argued that state officials need to do a better job working with hospitals to reduce costs and heighten reimbursements, and potentially even set up a temporary bailout program to help locally owned hospitals remain independent. Others have argued that the program includes loopholes and lacks needed transparency.
Hayden Rooke-Ley, an Oregon-based attorney and senior fellow at the Brown University School of Public Health, co-submitted testimony concerning the since-dropped OHSU-Legacy merger. Asked about the ruling he said the decision “doesn’t come as much of a surprise but is certainly good news for HCMO ... [state officials] and the legislature should feel confident moving forward that they can strengthen and refine the program without legal jeopardy.”
Appeal cited vague language
In its appeal, the Hospital Association of Oregon said the law gave too much power to the Oregon Health Authority and “has created costly and onerous processes that have proven both arbitrary and unpredictable.”
The law was defended by state lawyers. But a coalition of nurses’ unions, trial lawyers, advocates for physician-assisted death and LGBTQ advocacy groups also chimed in, arguing that it helps preserve Oregonians’ access to vital health care services.
On Tuesday, the hospital association said it does not intend to appeal. Its president, Becky Hultberg said in a prepared statement that the group “remains deeply concerned about the state’s Health Care Market Oversight program and its impact on hospitals. Through HCMO, the state has created a costly and arbitrary process that diverts resources away from supporting patient care and makes it harder for hospitals to be responsive to community need.”
She also pointed to a new federal law passed by Congress last week that is expected to kick millions off their health care, hurting hospitals’ bottom lines. “Oregon hospitals need every tool available to them to respond to the changing and often fraught health care landscape.”
The Oregon Health Authority issued a measured response to the appeals court ruling, issuing a statement that the agency “will continue to follow the law, as affirmed by the 9th U.S. Circuit Court of Appeals decision, to review proposed health care business deals to make sure they support Oregon’s goals of health equity, lower costs, increased access, and better care.”
2021 law considered toughest of its kind
Under the state’s approval process, health care entities that want to carry out mergers or other major deals in Oregon must submit filings showing that their transactions won’t cut crucial services, excessively drive up costs or otherwise run counter to the public interest. The law is considered the toughest of its kind in the U.S.
Having fought the effort in the Legislature, the association sued the health authority in October 2022, six months after the agency launched the program. Since then, the sides have traded arguments in federal court, while the program has tackled a string of mergers, involving clinics, hospitals, pharmacies and insurance plans around the state.
Among other things, merger review officials are reviewing an application by Dragonfly Health, an Arizona-based provider of equipment and pharmacy fulfillment services, to acquire Enclara Pharmacia, a Pennsylvania-based company that provides medications by mail to customers in Oregon and elsewhere.
Officials are also seeking comment on a controversial move by Providence to hand off its home health and hospice care to a national firm co-owned by private equity.
In its filings, the hospital association took issue with the vagueness of such words in the statute as “essential” and “health equity,” arguing that they were too general to guide health care providers who seek to merge with other providers. But the appeals court judges — including appointees of Clinton, Trump and Obama — didn’t agree.
“The statute’s plain text, combined with OHA’s rules … provide sufficient notice to weigh against a finding of vagueness,” they wrote.
Rulings by federal appellate panels can be appealed to the full Circuit Court bench, and then to the U.S. Supreme Court.