Anna Claire Vollers | (TNS) Stateline.org
State lawmakers are increasingly getting involved in health care mergers to prevent hospitals from closing and to avoid higher costs for patients. They are stopping deals that they believe are not in the public's best interest.
Financially struggling hospitals often seek to merge with or be taken over by other systems. After a slowdown during the pandemic, the number of health care mergers and acquisitions has steadily increased over the past two years. However, some proposed hospital deals in Connecticut, Louisiana, Minnesota and other places have fallen apart due to strong opposition from lawmakers, labor unions, and grassroots organizations. risen steadily over the past two years. But some proposed hospital deals in Connecticut, Louisiana, Minnesota and elsewhere have fizzled amid heavy pushback from lawmakers, organized labor and grassroots organizations.
At least 10 health care “megadeals” were called off or unwound just last year, due in part to increased oversight, reported Becker’s Hospital Review, an industry publication.
Minnesota Attorney General Keith Ellison, a Democrat, told Stateline that some health care transactions have failed to deliver on their promises, resulting in closed clinics, increased prices, and reduced access to care.
During his re-election campaign in late 2022, Ellison learned of a plan for Minnesota-based Fairview Health Services to merge with Sanford Health, a larger health care system based in South Dakota.
The proposed deal drew intense criticism from Minnesota’s Democratic legislators, nurses unions, University of Minnesota leaders, and community groups. Fairview owns the University of Minnesota Medical Center, which is supported by state funds. Some legislators opposed the merger because it could result in state funds being used outside of Minnesota and create a local health care monopoly leading to reduced services and higher costs for patients.
In response to the proposed Fairview-Sanford merger, Ellison's office held public listening sessions across the state. While some residents supported the deal, overall sentiment from stakeholders was negative.
In May 2023, Democratic lawmakers passed a bill that prohibits anti-competitive health care mergers and strengthens state oversight of potential deals. The bill was signed into law that month.
Two months later, Sanford Health called off the merger due to lack of support from “certain Minnesota stakeholders.”
Financially struggling hospitals
In March 2023, Massachusetts-based Covenant Health called off its plan to purchase a smaller, struggling health care system in the rural northeast corner of Connecticut. More than a quarter of announced health care deals in the United States last year involved a financially distressed partner, according to consultancy KaufmanHall.
Community groups rallied against the deal, concerned that Covenant’s takeover would lead to cuts in reproductive care and other services. Covenant is a Catholic system and follows a set of rules called the Ethical and Religious Directives for Catholic Health Care Services, which forbids the system from providing some types of health care. Those include emergency contraception, fertility services, gender-affirming care, abortion and some end-of-life care.
“I was worried because it was a Catholic-affiliated health care institution that follows Catholic directives,” said Connecticut state Rep. Jillian Gilchrest, a Democrat, in an interview with Stateline. “That region of the state already has limited health care options, and one of the Planned Parenthood clinics in that area had recently closed.
There was a worry that women in the northeast corner of Connecticut wouldn’t have access to reproductive health care.
Some people who live in the area worried were afraid they’d lose their hospital without Covenant’s takeover, but others came together as a group that called on the state to deny the proposed acquisition. Gilchrest joined 15 other Democratic state legislators in signing a letter document objecting to the deal.
It was not completed a few months later.
Covenant President/CEO Steve Grubbs explained in a statement statement about ending the deal that “the affiliation was no longer financially viable.”
Day Kimball Healthcare CEO R. Kyle Kramer said the system’s leadership was “ upset” by Covenant’s decision not to acquire it, in a statement he released shortly after it was announced.
“We are immediately pursuing the best path forward for Day Kimball and look forward to working with local and state officials as well as exploring discussions with other potential future partners to preserve essential hospital services in the northeastern Connecticut community,” Kramer’s statement read.
Gilchrest expressed her hope that Connecticut lawmakers will do more to protect services being eliminated following some hospital mergers, particularly women’s health services.
“Unfortunately, I feel like we have not been able to go far enough yet,” she told Stateline. “As a result of many of these mergers, when it comes to women’s reproductive health care, we continue to see the closure of services like labor and delivery units across Connecticut.”
More opposition
This year in Louisiana, resistance from state lawmakers and community groups halted a proposed $2.5 billion sale of the nonprofit Blue Cross and Blue Shield of Louisiana to for-profit insurance giant Elevance Health. Blue Cross had supported the proposed sale by saying it would help the nonprofit insurer slow rising health care costs and better compete with its national rivals.
Last month, Louisiana state senators presented a report to the state insurance commissioner outlining dozens of concerns over the fairness of the deal, alleged attempts by Blue Cross to influence policyholders’ votes, and Elevance’s “troubled” history of fines, penalties, lawsuits and premium increases. The Louisiana Hospital Association, other medical groups and the state treasurer also opposed the deal.
Louisiana state Sen. Jeremy Stine, a Republican, said he plans to introduce a bill this legislative session that would prevent deals like the proposed Blue Cross sale from taking effect without meeting certain consumer protection standards.
“The proposed Blue Cross Blue Shield sale to Elevance Health has raised concerns about the potential consequences for Louisiana’s healthcare landscape,” Stine said in a statement sent to Stateline.
“By implementing these safeguards, we aim to prevent any undue influence, personal gain, or hasty decision-making that may compromise the health and well-being of our community.”
In Minnesota, the attorney general’s office has examined almost twelve proposed health care transactions since the new law passed less than a year ago.
Elizabeth Odette, who manages the antitrust division at the Minnesota AG’s office, mentioned that before this law, they did not receive advance notice of a merger or other transaction unless the parties informed them.
This sometimes meant there was very little they could do before the parties completed the transaction.
However, the stronger law has given “not only our office but the public and the [involved] parties the opportunity to take more time to consider the implications of a proposed large merger,” she said.
Stateline is part of States Newsroom, a national nonprofit news organization focused on state policy.
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