Hospital Mergers Get Little State Oversight

Friday, June 10, 2016
Photo illustration: Steve Straehley/AllGov

By Patrick G. Lee, ProPublica

Mergers have become commonplace as hospital mega-chains increasingly dominate the American health-care market. But these deals often go unscrutinized by state regulators, who fail to address potential risks to patients losing access to care, according to a new report (pdf) released today.

MergerWatch, which analyzes the hospital industry and opposes faith-based health care restrictions, surveyed health care statutes and regulations in all 50 states and the District of Columbia. It found that only 10 states require government review before hospital facilities and services can be shut down. Only eight states and the District of Columbia mandate regulatory review when hospitals enter into more informal partnerships rather than full-scale mergers, closing a loophole that exists in other states for deals to pass with minimal state oversight.

Smaller, local hospitals often agree to merge with larger chains in order to survive. The goal is to cut overlapping services, negotiate better deals with insurance companies and share in the cost savings. But without state protections, local residents can see health services disappear, sometimes without a chance to weigh in.

“In a number of states, there is no oversight at all. So hospitals are just doing what makes business sense for them,” said Lois Uttley, one of the report’s co-authors and the director of MergerWatch. “Someone needs to be looking out for the patients and the community.”

Sometimes the loss of services is ideological: As ProPublica and Mother Jones have reported, the expansion of Catholic hospitals in Washington state has led to restrictions on women’s health services and end-of-life counseling. Other times it’s just the bottom line: Expensive services such as pediatrics, obstetrics, emergency room and neo-natal intensive care may be downsized when a non-profit hospital is taken over by a for-profit one, according to the report.

Even when state regulatory programs exist, they often fail to protect consumers from reductions in health-care services. That’s because state oversight programs were largely written in the 1960s and ’70s when hospitals were expanding and the main fear was duplication of facilities and services. Today, however, the opposite is happening: According to MergerWatch’s data, the number of hospitals that provide short-term acute-care has declined by about 240 over the past fifteen years in the United States. Meanwhile, the country’s remaining hospitals are consolidating at a faster rate: 112 hospital deals were announced in 2015, which is a 70% increase from 2010, according to a recent analysis by Kaufman, Hall & Associates LLC, a management consulting firm.

Most state governments offer few avenues for consumers to express their concerns about proposed hospital deals. Just six states require a public hearing for every merger application under review, MergerWatch found. In the absence of state-mandated public forums, grassroots battles against hospital mergers have been taking place across the country, driven largely by local residents only after health services have been restricted.

Consider Arizona: In 2010, the Sierra Vista Regional Health Center partnered with the Carondelet Health Network, a Catholic system. Many residents of rural Sierra Vista only became aware of this after they discovered new limitations on birth control, including tubal ligations and vasectomies, as well as on end-of-life options for the elderly.

“It happened before anybody had any input from the community,” Dotti Wellman, a longtime Sierra Vista resident who helped organize protests against the partnership, told ProPublica. “I was very angry to think that families were going to be denied care. Quite honestly, if something happened to me, I didn’t want to go there.”

Bruce Silva, an OB-GYN who was based at the health center, saw patients denied care, including a woman who needed an emergency abortion after miscarrying one of her 15-week-old twins. He describes the essential paradox of the situation: “What they felt was morally reprehensible was what I felt was the moral thing to do.” He explained that the nearest non-Catholic hospital was about 100 miles away and some patients in this rural area could not even afford the gas. “It was denying access to people who were poor,” he told ProPublica.

For several months, according to Wellman, she and a group of community residents — mostly patients over the age of 60 — picketed the hospital every weekday for about four hours. Some residents also provided the state attorney general’s office sworn statements of their views. After a year, the health center decided to end its partnership with the Catholic system.

Two years after the failed affiliation with Carondelet, Sierra Vista partnered with a larger for-profit hospital system that built a new facility and renamed it Canyon Vista Medical Center. In April, the parent company finalized a merger with another regional health-care group, forming an even bigger entity called RCCH Healthcare Partners whose expanded reach covers 12 states.

Jeff Atwood, a spokesman for RCCH, declined to comment on the Sierra Vista-Carondelet partnership. Gary Hopkins, a spokesman for Tenet Healthcare Corporation, the majority owner of Carondelet since September, said he could not comment because the partnership predates Tenet’s involvement.

Many states do allow the state attorney general to review transactions when they involve non-profit hospitals to ensure that their charitable status won’t be compromised. Some hospital mergers might also trigger antitrust review at the state or federal level, which aims to protect consumers (and their wallets) by making sure a single hospital system doesn’t gain monopoly-esque control over an entire area. Since November, the Federal Trade Commission has challenged proposed hospital mergers in Pennsylvania, West Virginia and Illinois.

Christine Khaikin, a co-author of the report, called MergerWatch’s work “a jumping off point” to “open the eyes of legislators and policymakers that the regulation of hospital transactions is not inherently bad. It can be used to the consumers’ advantage, and we’re hoping to start really engaging healthcare advocates in the states.”


To Learn More:

Who Makes Sure Hospital Mergers Do No Harm? Almost Nobody. (by Patrick G. Lee, ProPublica)

Closing of Rural Hospitals across U.S. Upends Communities (by Noel Brinkerhoff and Steve Straehley, AllGov)

Catholic Business Takes over Hospitals and Orders Affiliated Doctors to Stop Prescribing Birth Control (by Noel Brinkerhoff, AllGov)


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