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Bills Would Target Mergers Among Hospital Systems, Clinic Networks, Others

The Oregon Health Authority wants the public to be able to weigh in on proposed mergers and acquisitions, a proposal that advocates support.
Oregon State Capitol in Salem. | RENAUDE HATSEDAKIS
January 5, 2021

The state wants the authority to approve and deny mergers and acquisitions among hospital systems, clinic networks and other groups.

Hospital systems, clinic networks and other health care groups in Oregon may face more scrutiny when they seek to merge. 

The Oregon Health Authority, the Services Employees International Union and other groups want the state to have more oversight when health care companies seek to join forces. At least two separate proposals are in the pipeline for the 2021 Oregon legislative session that could create an oversight system to let the public weigh in on mergers and give the state the authority to approve or deny them.

Oregon currently has no system in place to regulate mergers and acquisitions in the health care industry, except for insurance companies and, separately, coordinated care organizations that serve Medicaid members. The COVID-19 pandemic has hit the health care industry hard financially, and advocates and state officials worry that more consolidation will take place and potentially drive up costs with less competition among providers and fewer options for consumers. 

In late December, the House Interim Committee on Health Care heard presentations about the proposals as part of its work to gather information and prepare for the 2021 session.  K. John McConnell, director of the Center for H ealth Systems and Effectiveness at Oregon Health & Science University, told lawmakers that the trend is generally toward more consolidation. He said this view is his own and does not reflect OHSU’s official position.

“One concern is that as these groups come together, there are fewer and fewer choices,” he said. 

When providers become a “must-have” in the health care system, they are able to raise their prices, McConnell said. Consolidation and mergers can save companies costs but that doesn’t necessarily mean that those savings will be passed on directly to consumers, even those with employer-provided commercial health insurance, McConnell  said. If costs rise, it’s important to remember that someone is paying for that, he said.  

“Even if the employer is paying for it, the burden falls on Joe Oregonian,” he said. “It’s not being borne by Nike or Intel or anything like that.”

Mergers and acquisitions in Oregon health care were taking place long before COVID-19 hit. In 2018, nonprofit PeaceHealth acquired for-profit ZOOM+Care, a network of primary and specialty care clinics. Portland-based nonprofit hospital system Legacy Health absorbed nonprofit Silverton Hospital in 2015. That year, Tennessee-based for-profit Quorum Health bought McKenzie-Willamette Medical Center in Springfield as part of a purchase of a roster of hospitals around the nation. The city-owned Ashland Community Hospital, in financial trouble, was absorbed into Medford-based nonprofit Asante Health Systems in 2013. In 2010, hospitals in Baker City and Ontario were absorbed by the non-profit Saint Alphonsus Health System.  

Oregon Health Authority Proposal 

Jeremy Vandehey, health policy and analytics director of the Oregon Health Authority, said concerns about rising health care costs existed before the pandemic hit. Commercial insurance premiums and out-of-pocket costs continue to increase for Oregonians, putting a strain on household budgets, Vandehey said. Oregon’s deductibles are the third highest in the nation, according to the analysis Vandehey presented lawmakers.

COVID-19 has squeezed smaller clinics and providers that have large overhead and less ability to streamline services such as information technology services and other overhead. The pandemic has also squeezed hospitals that have delayed profitable non-urgent surgeries in order to keep beds open for a potential influx of COVID-19 patients.

“We’ve seen this massive shock in the health care system,” Vandehey said. 

The health authority’s presentation, citing a 2020 congressional report, said that hospital consolidation in a market can lead to higher prices for commercially insured patients. Medicare and Medicaid have more power to dictate what hospitals charge them, so hospitals lean more heavily on commercial insurance plans. Meanwhile, consolidation has increased. For example, the proportion of primary care physicians affiliated with hospital-owned organizations nationwide has increased from 28% in 2010 to 44% in 2016. 

Vandehey stressed the authority’s efforts are a conversation starter and are “not intended to say consolidation is always necessarily bad.” The goal is to alert the community to proposed mergers and purchases and give the public a chance to weigh in before a deal goes through, he said.

The health authority, in its budget proposal for the 2021-2023 biennium, initially pushed for a consolidation review process that would start right away. Now, the agency wants lawmakers to let it craft a proposed framework to review mergers and acquisitions. The authority would work with the health care industry and others to develop a concept. That system would become a bill for the Legislature as early as 2022.

A proposal likely would give the authority the ability to reject a deal if it led to unreasonable price hikes for consumers. A system to review mergers and acquisitions also would give the authority another tool to push for equity and access in the health care system.

“We’d like to bring a plan back by 2022, given the urgency and concern that there could be major changes in the health system,” Vandehey told The Lund Report. “But this will largely depend on how the conversation goes with the Legislature and whether they’d like us to pursue the type of review we’ve proposed or a different type of process that might take more time to develop.”

The Oregon Health Authority’s proposal likely would apply to mergers and acquisitions that involve at least $10 million in annual net patient revenue. Vandehey said this figure is a “reasonable place to start and we’ll see how the discussion evolves.”

Under the authority’s original proposal to start reviewing mergers and acquisitions, the agency would analyze those proposals and the markets they impact and give the public a chance to weigh in at a hearing. This is patterned after a similar oversight system in Massachusetts. 

Advocates Want Oversight

Kirsten Isaacson, research director for Service Employees International Union Local 49, SEIU Local 49, also addressed lawmakers about the issue. The labor group, as part of a broader coalition of groups in Oregon, backs a system similar to that proposed by the health authority, but with changes.
Its proposal would require health care companies to notify the authority when proposed mergers and acquisitions involve at least $1 million in annual revenue or lead to a reduction in services, including reproductive health. Isaacson said this can be an issue when mergers and acquisitions involve Catholic-affiliated health care providers that don’t provide those services.

With Oregon’s high price of health care, Isaacson said, there’s “a great deal of urgency around this topic of health care consolidation,” and small, independent and community-based providers are more vulnerable.

Like the authority, Isaacson said the goal is not to stop mergers or deals that are good for patients. 

“We really want to put patients and health equity at the center,” Isaacson said.

Entities would have to demonstrate to the health authority that they would reduce patient costs,  increase access in underserved areas or address health inequities, Isaacson said.

The proposal also would put a review process in place after an approval. After four years, the state would come back and look at the evidence to see if the health care companies have lived up to their promises. This review would not give the authority the ability to unwind a merger. 

The SEIU Local 49 is part of the Equal Access to Care Coalition that backs the measure. That group includes the ACLU of Oregon, Basic Rights Oregon, NARAL Pro-Choice Oregon, Oregon Nurses Association, Planned Parenthood Advocates of Oregon.

You can reach Ben Botkin at [email protected] or via Twitter @BenBotkin1.