New Bill Pumps the Breaks on Health Care Consolidation in Oregon

Schwabe, Williamson & Wyatt PC

Schwabe, Williamson & Wyatt PC

The Equal Access to Care Act affects certain health care entities that are interested in ‎consummating a “material change transaction.” It is headed to the governor for signature and ‎is not a law as of this date. ‎

Before adjourning its 2021 session, the Oregon legislature passed an act that will make it more difficult for health care systems, insurers, and other health care entities to merge with, acquire, or otherwise join forces with their industry counterparts. Proponents of the Equal Access to Care Act, which is also known as House Bill 2362, contend that the new legislation is necessary to combat access limitations and price increases caused by consolidation in the health care arena. Detractors argue that the legislature is a placing a costly and unnecessary administrative burden on health care entities that are already struggling to cope with the financial fallout of the COVID-19 pandemic and other challenges.

HB 2362 targets health care entities that are interested in consummating what is referred to as a “material change transaction.” This term is given a detailed definition in the bill. Roughly, it means a transaction involving: (a) one party that has an average revenue of $25 million or more and another party that has, or is expected to have, an average revenue of at least $10 million; and (b) some change in corporate leadership, governance, or control of a health care entity. The bill specifically exempts from the definition of a “material change transaction” certain clinical affiliations for research or medical education, medical service contracts, management and administration agreements, participating provider contracts, and employment arrangements.

If HB 2362 becomes law (it currently awaits Governor Brown’s signature), then health care entities will be required to provide to the Department of Consumer and Business Services advance written notice of any material change transaction involving a domestic health insurer; or to the Oregon Health Authority at least 180 days’ advance written notice of any material change transaction not involving a domestic health insurer. The department and/or the authority, as applicable, will conduct a preliminary review of the notice and any supporting documentation the entities submit. If it is determined that the benefits clearly outweigh the burdens of the proposed transaction, then an approval may be issued. However, if doubts or concerns linger, then the department or the authority may order a comprehensive review.

A comprehensive review involves scrutiny of the proposed transaction by a review board comprised of members of the affected community, consumer advocates, and health care experts. The review can take 180 days or longer. The exact criteria for approval of material change transactions have yet to be developed. However, the bill places upon the parties the burden of demonstrating that the proposed transaction will bend the health care cost curve, increase access to services in medically underserved areas, or promote health care equity and access. It also obligates parties to demonstrate that the proposed transaction will improve health outcomes for Oregonians, and will produce cost- and access-related benefits that trump any anticompetitive effects. A review board may hold up to two public hearings to assist it in coming up with its final recommendation to the authority.

Parties whose material change transactions ultimately receive approval from the Oregon Health Authority are not out of the woods. The pending legislation stipulates that they must notify the authority upon completion of the transaction. They then must help facilitate follow-up reviews at the one, two, and five year marks. The authority will use these reviews to confirm that the parties continue to comply with the conditions imposed upon them during the approval process, and meet the cost abatement targets established under Oregon law. Parties found to be in violation of the conditions or with the notification and other provisions of the new act are subject to injunctions and fines of up to $10,000 per offense.

The Equal Access to Care Act now heads to Governor Kate Brown for her approval. In the meantime, health care providers are encouraged to familiarize themselves with the pending legislation.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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