Oregon lawmakers discussed concerns around hospital mergers at a Senate Interim Committee on Health Care meeting on Tuesday, as consolidation continues to increase across the country.
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Committee Chair Sen. Deb Patterson (D-Salem) said that although the issue is not as significant in Oregon as some other states, it is an important issue to track.
“In Oregon, we only have three hospitals that are owned by private investors,” Patterson said. “Large healthcare entities such as Tenet and HCA are more present in the eastern part of our country. But it’s still important to look at the market factors putting pressure on our hospitals.”
Katherine Gudiksen, senior health policy researcher at the University of California’s College of Law at San Francisco, cited KFF data that shows healthcare is becoming increasingly unaffordable, as family premiums and worker contributions are increasing much faster than the rate of inflation or wages.
The average annual single premium and the average annual family premium each increased by seven percent last year, according to KFF. Comparatively, there was an increase of 5.2 percent in workers’ wages and an inflation increase of 5.8 percent.
“The primary reason for that increase is an increase in prices for the services patients receive,” Gudiksen said.
The Health Care Cost Institute analyzed the underlying drivers to spending over the last five years, and over 80 percent of that spending was due to an increase in prices.
“So in my mind, the next question is do we get improved quality or good quality for spending this large amount of money? Compared to our peer nations, the answer is a resounding no. Economists and researchers all agree that one of the main drivers of this increased spending is consolidation and market power.”
Gudiksen said prices frequently increase following a hospital merger.
“The average [increase] is about 20 to 44 percent, (with) some even much higher,” she said. “There’s also evidence that hospitals not involved in the merger also raise their prices, essentially shadow pricing.”
Five health systems operate 539 community hospitals in 43 states, Gudiksen said, which represents more than 10 percent of the country’s hospitals.
“And the revenue of these systems grew at about twice the rate of the rest of the market,” she said. “UnitedHealthcare and CVS are two of the 10 largest companies in the US by revenue. UnitedHealthcare is now the largest employer of physicians. And they employ more than 70,000 physicians across the country.”
States can conduct merger reviews—examining transactions as they occur—to protect themselves from harmful mergers, Gudiksen said.
“They protect existing competition, and can prevent anti-competitive behavior and its incipiency,” she said.
Oregon is a leader among other states in conducting merger reviews through the Oregon Health Authority’s (OHA) Health Care Market Oversight (HCMO) program, Gudiksen said. HCMO was launched in March 2020, and it has reviewed several important transactions since then.
HCMO Program Manager Sarah Bartelmann said the program reviews proposed healthcare business deals to make sure they support statewide goals related to cost, equity, access, and quality.
“All of our reviews are structured around those four domains. A lot of these transactions previously did not have a lot of awareness that they were happening, or were about to happen. So part of our program is designed to promote transparency.”
During reviews, HCMO examines how a proposed transaction could affect healthcare costs, quality of care, access to care, and health equity, Bartelmann said.
HCMO has received 14 transaction notices since it was launched, OHA’s Dave Baden said. It has completed 11 preliminary reviews. Four were approved, four were approved with certain conditions added to the proposal, two are in the process of getting a comprehensive review, and one transaction was withdrawn.
HCMO approved Amazon’s request to acquire One Medical—a primary care organization that operates more than 180 medical offices across the country, including five primary care clinics in Oregon—in December 2022.
One of HCMO’s two current transaction reviews includes a request by SCAN Group and CareOregon to create a nonprofit organization to serve Medicare and Medicaid members across multiple states. Baden said HCMO hopes to have the review ready by January.
Most Oregon hospitals are affiliated with or owned by health systems, Baden said. In 2003, 43 percent of Oregon hospitals were independent. By 2020, that number decreased to 25 percent.
Most of Oregon’s physicians work for health systems as well, Baden said. In 2016, 39 percent of Portland physicians worked for health systems. That number increased to 71 percent in 2018.
“Oregon, as compared to other states, is not as highly concentrated in the insurer market. As of 2017, Oregon was the only state where no metropolitan statistical areas exceeded the threshold for a ‘highly concentrated’ commercial payer market.”
While Oregon has taken steps to keep consolidation in check through HCMO, more can be done, Gudiksen said. Additional steps states can take include:
- Prohibiting anti-competitive contracting practices
- Setting minimum community benefit requirements for nonprofit entities
- Setting affordability standards in insurance reviews
- Capping rates on services provided out of network
- Using the Hospital Global Budget process
“Oregon is already a leader in reviewing mergers to prevent anti-competitive consolidation, but there are other options that exist, and price increases may necessitate thinking about policies to address behavior and pricing,” Gudiksen said. “There are a number of policies open to Oregon.”