OHSU's takeover of Legacy Health would violate federal market standards, advocates say

The proposed takeover of Legacy Health by Oregon Health & Science University would violate federal antitrust standards intended to guard against anticompetitive behavior and higher costs, according to a high-profile national advocacy group and a Brown University think tank.

The new arguments were submitted to the state officials reviewing the proposed merger, which has split the state’s health care community. The comments echo concerns raised by former Gov. John Kitzhaber and others who argue that to preserve competition in Oregon health care the state should step in and help hospitals such as Legacy’s that lost money during the pandemic. 

Under the letterhead of the Ivy League school in Rhode Island, however, the 22-page comment went into far greater detail, urging state leaders to support the state merger review program while aggressively highlighting recent turmoil at OHSU. “Recent mismanagement at OHSU hardly allays concerns about the potential for abuses of market power,” it said.

Asked about the new comments, representatives of OHSU say the benefits of the integrated system — such as helping ensure providers and hospitals are fully booked so their capacity is maximized — would outweigh any risks. Supporters of the proposed deal say finding an in-state partner for Legacy could prevent an out-of-state national hospital chain from moving in.

A Washington, D.C. attorney hired by the university for purposes of the merger, Ken Field, told The Lund Report that federal antitrust standards are not applicable since the university is exempted from state and federal antitrust law — echoing a similar argument made by now-former OHSU President Danny Jacobs.

Regardless, the new entry to the debate adds to the challenges faced by OHSU. 

“I would just like to urge people to read the [comments] analyzing the data around this particular proposed merger,” said Sen. Deb Patterson Tuesday in a legislative preview panel hosted by the Oregon Health Forum. “I think it would be really helpful for people to review.”

National voices weigh in

The merged system proposed by OHSU and Legacy would control five out of six hospitals in Multnomah County and seven out of 13 hospitals in the tricounty region around Portland.

The university has proposed investing $1 billion to upgrade Legacy facilities and take over their operation while maintaining their workforce without layoffs for the next six months. The university’s leadership contends that with OHSU investments, integration will increase health care access by making better use of existing resources and providers.

But critics have pointed to studies indicating that large health systems use their market power to extract higher hospital reimbursement rates while providing no improvements in care quality or access. In some cases, quality and access have declined following hospital mergers.

The new comment echoes that school of thought, saying that bigger is not better, and in fact it’s probably worse.

It was submitted on behalf of the Brown University School of Public Health and the American Economic Liberties Project, which advocates for controls on corporate power and monopolies. The group was founded by a former treasury department staffer, Sarah Miller, and is staffed by Mathew Stoller, a prominent national voice on the perils of monopolies and consolidation. It’s received funding from progressive organizations affiliated with Pierre Omidyar, George Soros and others.

 The comments were authored by lawyers and health economists. They include Oregon attorney Hayden Rooke-Ley, who is a health law and policy fellow at Brown and a senior fellow at the American Economic Liberties Project, and Erin Fuse Brown, a professor and policy analyst at the university’s Center for Advancing Policy Research. She is frequently quoted in national coverage of health care consolidation.

The newly filed comments take aim at the university’s application, which portrayed the new merger as having little effect when measured against a health care market comprising most of the state.

Already, a report by merger review officials at the state Health Care Market Oversight Office implicitly rejected the OHSU portrayal, including two hospitals that are controlled by OHSU in the state analysis that the university did not. OHSU's analysis had essentially portrayed the two as unaffiliated when analyzing the market clout of the proposed  merged hospital system.

The new comment goes further, arguing that the market power analysis methodology supported by federal court rulings in Federal Trade Commission antitrust cases indicate the OHSU merger’s effect on market competition would be much greater than portrayed by the university, meaning higher prices for insurers and consumers. 

“OHSU appears to have applied the [federal analysis] method incorrectly in order to evade scrutiny of its acquisition of Legacy Health,” according to the new filing.

 OHSU’s outside attorney, Field, spent six years at the Federal Trade Commission. Asked by The Lund Report to respond to the advocates’ claim that OHSU used inaccurate methods, he repeatedly declined to defend the specific approach used in the application as meeting federal standards, other than to say such things are subjective. He noted that the state and federal governments have exempted OHSU from the antitrust law that such limits are based on. That's because the former state teaching hospital is an academic medical center. 

Field said that because the university is a public corporation — a quasigovernmental entity that makes it a public agency under Oregon law, overseen by a board appointed by the governor— it is subject to greater accountability than other hospitals and health systems face. Therefore, fears that a merged entity would disrupt the market are groundless, he said.