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High-profile Oregon health-mergers review law survives hospitals’ challenge

Federal judge dismisses lawsuit that sought to knock out state office intended to protect access and affordability. Hospitals may appeal.
May 17, 2024

Oregon’s groundbreaking program to vet large health care mergers and purchases has weathered its first major legal challenge, as a federal judge on Thursday tossed out a lawsuit filed by Oregon’s hospitals that claimed the law was too vague.

Leadership of the Hospital Association of Oregon said it is considering whether to appeal the ruling.

In his ruling,  U.S. District Judge Michael Simon found that the hospitals’ advocacy group had failed to show that the 2021 state law creating the program, along with the subsequent program rules, were so vague that they unfairly deprived affected entities of   the due process rights guaranteed by the U.S. Constitution..

He declined to rule on the hospitals’ second  claim: that the Legislature violated the state constitution by delegating too much power to the Oregon Health Authority to craft details of the program. It’s more appropriate for a state court to decide that, Simon ruled.

In a statement issued by the hospital group, Becky Hultberg, its CEO, said: “Proponents of this law said it would improve health equity and protect access to care, which we wholeheartedly support. However, the law fails to accomplish those objectives … Instead, we have an agency that has been given too much power, and it has created costly and onerous processes that have proven both arbitrary and unpredictable.”

The health authority said it was pleased with the ruling. The agency "will continue to provide oversight on important health care mergers and acquisition in Oregon as directed by the Oregon legislature," said David Baden, the agency's deputy director for programs and policy.

2021 law considered toughest of its kind

WIth the passage of HB 2362, the Oregon Legislature created the Health Care Market Oversight office to shield consumers and patients from mergers’ potential harmful effects and protect abortion access.

To win state approval, 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.

It came at a time when mergers and acquisitions in health care had accelerated rapidly, a trend that many experts said was hurting access to care and boosting costs for consumers. The law was considered the toughest of its kind.

Having fought the effort in the Legislature, the association sued the health authority in October 2022, six months after the agency finalized administrative rules and launched the program. Since then, the sides have traded arguments in federal court, while the program has tackled a string of high-profile mergers.

Complex area of law

 Though the new program had barely begun, the hospital association argued that the law and regulations, including many definitions, were excessively vague and were therefore unconstitutional. 

The agency countered that the rules were copiously detailed and that if there was any ambiguity, it was legally acceptable.

Citing at length from case law, the judge sided with the state, ruling the hospitals would have had to show that the state’s law and regulations set out “no standard of conduct at all,”.

The judge wrote that some vagueness is permissible, given the circumstances of the program, and that the hospitals can pursue governmental administrative processes to resolve ambiguities.

The hospitals’ other argument was that the law creating the health merger oversight program violated Oregon Constitution’s so-called “non-delegation doctrine” by giving the health authority too much power to set program specifics. Citing case law, Judge Simon wrote that for the sake of clarity and simplicity, he would not rule on that claim.

 You can reach Christian Wihtol at [email protected].