Because the early Nineteen Nineties, many states’ well being care markets have seen a important improve in supplier consolidation, together with in Oregon. Consolidation in well being care markets can lead to increased costs, lowered entry to providers, diminished high quality of care, and deeper well being inequities. Between 2013 and 2019 well being care spending in Oregon rose by 49%, which outpaced nationwide progress in well being spending, revenue, and inflation over the identical time interval. Oregon’s response to those developments has included novel efforts to curb supplier consolidation via state oversight of well being system transactions. Whereas this technique continues to be within the early levels of implementation and has some challenges, different states can be taught from Oregon’s efforts.
Oregon creates new oversight authority to counter consolidation
The Oregon Legislature created the Well being Care Market Oversight Program (HCMO) below the Oregon Well being Authority (OHA) in 2022. The HCMO program has the authority to evaluate materials change transactions, that are mergers, acquisitions, affiliations, gross sales, leases, or different enterprise offers that change management of a well being care entity. OHA opinions these transactions when at the least one entity has had $25 million or extra in common income previously three fiscal years and one other occasion has realized $10 million or extra in common income previously three fiscal years or is projected to generate this stage of income in its first 12 months. OHA can approve these transactions if the related events present that their enterprise settlement will adhere to the targets of OHA: decreasing customers’ value of care, growing high quality of care, and enhancing entry to traditionally underserved sufferers.
If OHA determines {that a} transaction threatens a number of of those targets and requires a extra complete evaluate, it should assess the potential transaction’s seemingly results and search enter from group members. OHA can approve a transaction that requires a complete evaluate if it achieves at the least one of the next necessities: reduces spending progress, will increase entry to care in underserved areas, or improves well being outcomes.
Thus far, the brand new oversight authority has not rejected any transactions
So far, OHA has permitted nearly all of the transactions it has examined after a preliminary evaluate, whereas hardly ever requiring a complete evaluate. Since 2022, the HCMO program evaluated 22 transactions and carried out opinions on 20, approving six outright and approving 5 extra with situations hooked up. OHA continues to be reviewing 4 different transactions, and the remainder both withdrew or acquired particular emergency standing. Solely two of 20 transactions triggered a complete evaluate. OHA additionally opinions transactions one, two, and 5 years afterwards to make sure that the transaction continues to satisfy OHA’s targets. Throughout these follow-up opinions, OHA can impose penalties, together with a monetary penalty of not more than $10,000 for every offense, akin to failing to adjust to transaction agreements, including to value progress, or growing spending for the well being care entity.
Whereas OHA has not rejected any transaction so far, events in two potential mergers have withdrawn their functions through the evaluate course of – one in a preliminary evaluate, and one after OHA decided the transaction wanted a complete evaluate. The presence of the state evaluate course of itself could discourage questionable mergers and acquisitions from shifting forward.
For the transactions permitted with situations, OHA displays the entities’ conduct over time to make sure that they abide by the situations and mitigate potential unfavourable unwanted side effects. One instance is the acquisition of KeiperSpine, a doctor observe, by Agility MSO, a administration providers group that provides non-clinical administration providers to physician-owned clinics and is majority owned by a non-public fairness agency. OHA permitted this transaction with the stipulations that suppliers preserve their management of medical selections and employment contracts and proceed serving sufferers with Medicare, amongst different necessities.
States can be taught from the strengths and weaknesses of Oregon’s legislation
Because the first state well being care oversight company with the authority to disclaim transactions, HCMO has served as a mannequin for different states searching for to manage supplier consolidation. Throughout its 2024 legislative session, New Mexico enacted a legislation that empowers their Well being Care Authority to approve or disapprove transactions. California’s Workplace of Well being Care Affordability (OHCA) can evaluate materials change transactions however not forestall them. Massachusetts’ Well being Coverage Fee (HPC) transaction evaluate course of predates Oregon’s legislation, however like California’s OHCA, can not forestall transactions. The Massachusetts HPC additionally nonetheless doesn’t have the authority to evaluate non-public equity-backed transactions regardless of the rise of personal fairness investments in well being care and the newest debacle related to the non-public equity-backed acquisition of the Steward hospital chain and its subsequent chapter.
Different states additionally grapple with more and more consolidated well being methods, with policymakers introducing payments to examine supplier consolidation in a couple of third of state legislatures. The vast majority of these payments goal materials change transactions ultimately. In assist of those efforts, the Nationwide Academy of State Well being Coverage just lately up to date their mannequin invoice on transaction evaluate.
With solely two years of expertise, a full evaluation of Oregon’s merger evaluate legislation is untimely. Company officers have expressed considerations about this system’s present assets and long-term financing. Though the entities searching for a transaction should pay charges to the evaluate program, they don’t cowl all of the bills of its operation.
A further critique of Oregon’s HCMO program is the dearth of transparency for emergency exemptions. For instance, OHA permitted a request for an emergency exemption from evaluate submitted by Optum Oregon, owned by United Well being Care, and the Corvallis Clinic, an Oregon-based medical group. A few of the transaction supplies they used to justify the exemption are redacted on OHA’s web site. With these redactions, the general public can not decide why this transaction deserved an emergency exemption.
Lastly, some argue that the revenue thresholds for triggering a transaction evaluate, specified within the statute, are too excessive. Consolidation in well being care markets just isn’t restricted to companies which have income equal to or exceeding $25 million and $10 million: a big firm shopping for up a lot smaller corporations can nonetheless lead to a extra consolidated market – and better costs for customers – over time.
Takeaways
Oregon’s merger evaluate legislation just isn’t excellent, however the advantages for customers who wrestle to afford the growing value of well being care seemingly outweigh the rising pains. For different states contemplating their very own merger evaluate legal guidelines, policymakers might think about establishing, and adequately resourcing, comparable packages designed to mitigate trade consolidation and shield customers from the ensuing value will increase.
