For the reason that early Nineties, many states’ well being care markets have seen a vital improve in supplier consolidation, together with in Oregon. Consolidation in well being care markets can lead to larger costs, diminished entry to companies, 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, earnings, and inflation over the identical time interval. Oregon’s response to those traits has included novel efforts to curb supplier consolidation by state oversight of well being system transactions. Whereas this technique remains to be within the early phases of implementation and has some challenges, different states can study from Oregon’s efforts.
Oregon creates new oversight authority to counter consolidation
The Oregon Legislature created the Well being Care Market Oversight Program (HCMO) beneath the Oregon Well being Authority (OHA) in 2022. The HCMO program has the authority to assessment 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 evaluations these transactions when a minimum of one entity has had $25 million or extra in common income previously three fiscal years and one other social gathering 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 yr. OHA can approve these transactions if the related events present that their enterprise settlement will adhere to the objectives of OHA: decreasing shoppers’ price 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 objectives and requires a extra complete assessment, it can assess the potential transaction’s doubtless results and search enter from neighborhood members. OHA can approve a transaction that requires a complete assessment if it achieves a minimum of 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
Thus far, OHA has authorised the vast majority of the transactions it has examined after a preliminary assessment, whereas not often requiring a complete assessment. Since 2022, the HCMO program evaluated 22 transactions and carried out evaluations on 20, approving six outright and approving 5 extra with situations hooked up. OHA remains to be reviewing 4 different transactions, and the remaining both withdrew or obtained particular emergency standing. Solely two of 20 transactions triggered a complete assessment. OHA additionally evaluations transactions one, two, and 5 years afterwards to make sure that the transaction continues to fulfill OHA’s objectives. Throughout these follow-up evaluations, OHA can impose penalties, together with a monetary penalty of not more than $10,000 for every offense, resembling failing to adjust to transaction agreements, including to price 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 purposes in the course of the assessment course of – one in a preliminary assessment, and one after OHA decided the transaction wanted a complete assessment. The presence of the state assessment course of itself could discourage questionable mergers and acquisitions from shifting forward.
For the transactions authorised with situations, OHA displays the entities’ conduct over time to make sure that they abide by the situations and mitigate potential damaging uncomfortable side effects. One instance is the acquisition of KeiperSpine, a doctor apply, by Agility MSO, a administration companies group that provides non-clinical administration companies to physician-owned clinics and is majority owned by a non-public fairness agency. OHA authorised this transaction with the stipulations that suppliers preserve their management of scientific choices and employment contracts and proceed serving sufferers with Medicare, amongst different necessities.
States can study 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 in search of 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 assessment materials change transactions however not forestall them. Massachusetts’ Well being Coverage Fee (HPC) transaction assessment 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 assessment personal equity-backed transactions regardless of the rise of personal fairness investments in well being care and the latest debacle related to the personal 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 not directly. In help of those efforts, the Nationwide Academy of State Well being Coverage just lately up to date their mannequin invoice on transaction assessment.
With solely two years of expertise, a full evaluation of Oregon’s merger assessment legislation is untimely. Company officers have expressed issues about this system’s present sources and long-term financing. Though the entities in search of a transaction should pay charges to the assessment program, they don’t cowl all of the bills of its operation.
An extra critique of Oregon’s HCMO program is the shortage of transparency for emergency exemptions. For instance, OHA authorised a request for an emergency exemption from assessment submitted by Optum Oregon, owned by United Well being Care, and the Corvallis Clinic, an Oregon-based medical group. Among 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 assessment, specified within the statute, are too excessive. Consolidation in well being care markets will not be restricted to companies which have earnings equal to or exceeding $25 million and $10 million: a big firm shopping for up a lot smaller firms can nonetheless lead to a extra consolidated market – and better costs for shoppers – over time.
Takeaways
Oregon’s merger assessment legislation will not be good, however the advantages for shoppers who wrestle to afford the growing price of well being care doubtless outweigh the rising pains. For different states contemplating their very own merger assessment legal guidelines, policymakers might think about establishing, and adequately resourcing, related packages designed to mitigate business consolidation and defend shoppers from the ensuing price will increase.