Because the early Nineteen Nineties, many states’ well being care markets have seen a vital enhance in supplier consolidation, together with in Oregon. Consolidation in well being care markets can lead to larger 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 tendencies has included novel efforts to curb supplier consolidation by 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 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) below the Oregon Well being Authority (OHA) in 2022. The HCMO program has the authority to evaluation 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 a minimum of one entity has had $25 million or extra in common income up to now three fiscal years and one other occasion has realized $10 million or extra in common income up to now 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 objectives of OHA: decreasing shoppers’ 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 objectives and requires a extra complete evaluation, it’s going to assess the potential transaction’s possible results and search enter from group members. OHA can approve a transaction that requires a complete evaluation 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.
To this point, the brand new oversight authority has not rejected any transactions
Thus far, OHA has permitted the vast majority of the transactions it has examined after a preliminary evaluation, whereas hardly ever requiring a complete evaluation. Since 2022, the HCMO program evaluated 22 transactions and performed opinions on 20, approving six outright and approving 5 extra with situations hooked up. OHA continues to be reviewing 4 different transactions, and the remaining both withdrew or obtained particular emergency standing. Solely two of 20 transactions triggered a complete evaluation. OHA additionally opinions transactions one, two, and 5 years afterwards to make sure that the transaction continues to satisfy OHA’s objectives. Throughout these follow-up opinions, OHA can impose penalties, together with a monetary penalty of not more than $10,000 for every offense, comparable 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 up to now, events in two potential mergers have withdrawn their functions throughout the evaluation course of – one in a preliminary evaluation, and one after OHA decided the transaction wanted a complete evaluation. The presence of the state evaluation course of itself could discourage questionable mergers and acquisitions from transferring forward.
For the transactions permitted with situations, OHA screens the entities’ conduct over time to make sure that they abide by the situations and mitigate potential adverse unintended effects. One instance is the acquisition of KeiperSpine, a doctor observe, by Agility MSO, a administration providers group that gives non-clinical administration providers to physician-owned clinics and is majority owned by a personal fairness agency. OHA permitted this transaction with the stipulations that suppliers maintain their management of scientific selections and employment contracts and proceed serving sufferers with Medicare, amongst different necessities.
States can study from the strengths and weaknesses of Oregon’s regulation
Because the first state well being care oversight company with the authority to disclaim transactions, HCMO has served as a mannequin for different states looking for to regulate supplier consolidation. Throughout its 2024 legislative session, New Mexico enacted a regulation that empowers their Well being Care Authority to approve or disapprove transactions. California’s Workplace of Well being Care Affordability (OHCA) can evaluation materials change transactions however not stop them. Massachusetts’ Well being Coverage Fee (HPC) transaction evaluation course of predates Oregon’s regulation, however like California’s OHCA, can not stop transactions. The Massachusetts HPC additionally nonetheless doesn’t have the authority to evaluation personal equity-backed transactions regardless of the rise of personal fairness investments in well being care and the newest 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. Nearly all of these payments goal materials change transactions ultimately. In assist of those efforts, the Nationwide Academy of State Well being Coverage lately up to date their mannequin invoice on transaction evaluation.
With solely two years of expertise, a full evaluation of Oregon’s merger evaluation regulation is untimely. Company officers have expressed issues about this system’s present sources and long-term financing. Though the entities looking for a transaction should pay charges to the evaluation program, they don’t cowl all of the bills of its operation.
An extra 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 evaluation submitted by Optum Oregon, owned by United Well being Care, and the Corvallis Clinic, an Oregon-based medical group. A number 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 evaluation, specified within the statute, are too excessive. Consolidation in well being care markets shouldn’t be restricted to companies which have income equal to or exceeding $25 million and $10 million: a big firm shopping for up a lot smaller firms can nonetheless end in a extra consolidated market – and better costs for shoppers – over time.
Takeaways
Oregon’s merger evaluation regulation shouldn’t be excellent, however the advantages for shoppers who battle to afford the growing value of well being care possible outweigh the rising pains. For different states contemplating their very own merger evaluation legal guidelines, policymakers may contemplate establishing, and adequately resourcing, related packages designed to mitigate trade consolidation and shield shoppers from the ensuing value will increase.
