On July 27, 2021, Governor Kate Brown signed into law a bill that will make it more difficult for health care entities in Oregon to consummate mergers and similar transactions. HB 2362, which has been dubbed by its sponsors as the Equal Access to Care Act (the “Act”), requires parties to provide to the Department of Consumer and Business Services (“DCBS”) or Oregon Health Authority (“OHA”) at least 180 days’ advance written notice of any “material change transaction.” The DCBS or OHA will review proposed transactions with internal resources or, if deemed appropriate, with the assistance of community review boards. Transactions that are found to “have a negative impact on access to affordable health care in [Oregon]” are subject to disapproval or conditional approval.
The term “material change transaction” is given a detailed definition in the Act. 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 Act 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.
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 the notification and other provisions of the new Act are subject to injunctions and fines of up to $10,000 per offense.
Numerous health systems, hospitals, and other health care organizations voiced their opposition to the new legislation. In a statement released prior to the governor’s signature of the Act, the Oregon Association of Hospitals and Health Systems argued, “There is no evidence that affiliations and partnerships are increasing the cost of care in Oregon or limiting services.” Supporters of the Act, including two chapters of Oregon’s largest labor union, the Service Employees International Union, disagree. They contend that the new law will give the public a chance to weigh in on transactions that may limit choice and raise prices.
The work of fleshing out the details of the Act now goes to the OHA. The agency is tasked with drafting rules to address transactions that are needed emergently, occasions when preliminary reviews cannot be timely completed, and the process for carrying out comprehensive reviews. In the meantime, health care entities will be trying to gain a better understanding of the new rules, as well as the increasingly challenging environment in which they must conduct their operations.