Since the early 1990s, many states’ health care markets have seen a significant increase in provider consolidation, including in Oregon. Consolidation in health care markets can lead to higher prices, reduced access to services, diminished quality of care, and deeper health inequities. Between 2013 and 2019 health care spending in Oregon rose by 49%, which outpaced national growth in health spending, income, and inflation over the same time period. Oregon’s response to these trends has included novel efforts to curb provider consolidation through state oversight of health system transactions. While this strategy is still in the early stages of implementation and has some challenges, other states can learn from Oregon’s efforts.
Oregon creates new oversight authority to counter consolidation
The Oregon Legislature created the Health Care Market Oversight Program (HCMO) under the Oregon Health Authority (OHA) in 2022. The HCMO program has the authority to review material change transactions, which are mergers, acquisitions, affiliations, sales, leases, or other business deals that change control of a health care entity. OHA reviews these transactions when at least one entity has had $25 million or more in average revenue in the past three fiscal years and another party has realized $10 million or more in average revenue in the past three fiscal years or is projected to generate this level of revenue in its first year. OHA can approve these transactions if the relevant parties show that their business agreement will adhere to the goals of OHA: reducing consumers’ cost of care, increasing quality of care, and improving access to historically underserved patients.
If OHA determines that a transaction threatens one or more of these goals and requires a more comprehensive review, it will assess the potential transaction’s likely effects and seek input from community members. OHA can approve a transaction that requires a comprehensive review if it achieves at least one of the following requirements: reduces spending growth, increases access to care in underserved areas, or improves health outcomes.
So far, the new oversight authority has not rejected any transactions
To date, OHA has approved the majority of the transactions it has examined after a preliminary review, while rarely requiring a comprehensive review. Since 2022, the HCMO program evaluated 22 transactions and conducted reviews on 20, approving six outright and approving five more with conditions attached. OHA is still reviewing four other transactions, and the rest either withdrew or received special emergency status. Only two of 20 transactions triggered a comprehensive review. OHA also reviews transactions one, two, and five years afterwards to ensure that the transaction continues to meet OHA’s goals. During these follow-up reviews, OHA can impose penalties, including a financial penalty of no more than $10,000 for each offense, such as failing to comply with transaction agreements, adding to cost growth, or increasing spending for the health care entity.
While OHA has not rejected any transaction to date, parties in two potential mergers have withdrawn their applications during the review process – one in a preliminary review, and one after OHA determined the transaction needed a comprehensive review. The presence of the state review process itself may discourage questionable mergers and acquisitions from moving ahead.
For the transactions approved with conditions, OHA monitors the entities’ behavior over time to ensure that they abide by the conditions and mitigate potential negative side effects. One example is the acquisition of KeiperSpine, a physician practice, by Agility MSO, a management services organization that offers non-clinical management services to physician-owned clinics and is majority owned by a private equity firm. OHA approved this transaction with the stipulations that providers keep their control of clinical decisions and employment contracts and continue serving patients with Medicare, among other requirements.
States can learn from the strengths and weaknesses of Oregon’s law
As the first state health care oversight agency with the authority to deny transactions, HCMO has served as a model for other states seeking to control provider consolidation. During its 2024 legislative session, New Mexico enacted a law that empowers their Health Care Authority to approve or disapprove transactions. California’s Office of Health Care Affordability (OHCA) can review material change transactions but not prevent them. Massachusetts’ Health Policy Commission (HPC) transaction review process predates Oregon’s law, but like California’s OHCA, cannot prevent transactions. The Massachusetts HPC also still does not have the authority to review private equity-backed transactions despite the rise of private equity investments in health care and the most recent debacle associated with the private equity-backed acquisition of the Steward hospital chain and its subsequent bankruptcy.
Other states also grapple with increasingly consolidated health systems, with policymakers introducing bills to check provider consolidation in about a third of state legislatures. The majority of these bills target material change transactions in some way. In support of these efforts, the National Academy of State Health Policy recently updated their model bill on transaction review.
With only two years of experience, a full assessment of Oregon’s merger review law is premature. Agency officials have expressed concerns about the program’s current resources and long-term financing. Although the entities seeking a transaction must pay fees to the review program, they do not cover all the expenses of its operation.
An additional critique of Oregon’s HCMO program is the lack of transparency for emergency exemptions. For example, OHA approved a request for an emergency exemption from review submitted by Optum Oregon, owned by United Health Care, and the Corvallis Clinic, an Oregon-based medical group. Some of the transaction materials they used to justify the exemption are redacted on OHA’s website. With these redactions, the public cannot determine why this transaction deserved an emergency exemption.
Finally, some argue that the profit thresholds for triggering a transaction review, specified in the statute, are too high. Consolidation in health care markets is not limited to firms that have profits equal to or exceeding $25 million and $10 million: a large company buying up much smaller companies can still result in a more consolidated market – and higher prices for consumers – over time.
Takeaways
Oregon’s merger review law is not perfect, but the benefits for consumers who struggle to afford the increasing cost of health care likely outweigh the growing pains. For other states considering their own merger review laws, policymakers could consider establishing, and adequately resourcing, similar programs designed to mitigate industry consolidation and protect consumers from the resulting cost increases.