Mergers

The Hospital Association of Oregon lost in court last week in its attempt to block an Oregon law that gave the state the power to block some medical mergers. The association told us Monday morning it is still considering an appeal.

Should the state have the power to block it if one hospital wants to join another? What about if a doctor’s group wants to join another doctor’s group?

Hospitals and other providers have been consolidating across the country. There are horizontal mergers when hospitals and health systems join each other. There are vertical mergers when things such as physician groups join large groups. Then there are cross-market mergers across states.

They are going up, according to the Kaiser Family Foundation. Between 2018 and 2023, some 428 hospital and health systems merged. The number of doctors working in a hospital or a practice “at least partially owned by a hospital or health system increased from 29% in 2012 to 41% in 2022.”

Mergers are not necessarily bad. A merger can lead to efficiencies from scale and it can give hospitals or doctors groups more clout when dealing with insurers. It also has meant questions about access to care, quality and competition.

An Oregon legislative response was House Bill 2362 in 2021. It gave the Oregon Health Authority the power to monitor mergers between health care entities. It can approve or disapprove them.

Judge Michael H. Simon of the U.S. District Court for the District of Oregon ruled for the state. He wrote in his opinion that the hospital association failed to show the state law violated due process under the Fourteenth Amendment to the U.S. Constitution by lacking fair notice or having a risk of arbitrary enforcement. He did not rule on a second claim, which was under state law. The association said the law violated the Oregon Constitution, because it was argued that the Legislature improperly delegated its authority to a state agency.

That bill likely won’t be the last time the Legislature intervenes in medical mergers. State Rep. Ben Bowman, D-Tigard, who is the new House majority leader, held a meeting earlier this month on legislation he tried to pass this year and he is aiming to bring back in 2025. It would close “loopholes” in the requirement in Oregon that doctors must own their own practices.