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News / Health / Health Wire

How a bill could affect health care consolidations, patient care in Washington

By Elise Takahama, The Seattle Times
Published: February 23, 2024, 10:40am

The boom of health care mergers and acquisitions in Washington state has offered a way for many smaller, financially struggling hospitals and clinics to stay afloat, industry leaders say. But when those larger health systems start to make cuts they think are necessary, is patient access to care really being protected?

A bill gaining momentum in the state Legislature aims to explore that question — and argue that more oversight of these types of consolidations is needed to ensure they aren’t slashing services, driving up health costs and reducing market competition.

The Keep Our Care Act, as Senate Bill 5241 is known, has moved swiftly through the legislative session this year, gaining approval in the Senate earlier this month and nearing a final vote in the House. A version of the bill was introduced the past three years, but has never made it past the finish line.

“We’ve heard loud and clear from neighbors in Washington and folks across the country that when we treat our health system like a business proposition and decisions are made that don’t serve the best interests of individuals who are seeking care, communities are left without access” to certain health care services, said Sen. Emily Randall, D-Bremerton, the bill’s prime sponsor.

Randall and other bill supporters worry about the growing presence of large national health care chains in the state, concerned their leadership is more likely to make decisions about services and costs based on profits, rather than what might be best for patients. Now, eight large health systems maintain more than 90% of licensed beds in the state, according to a recent state report.

More recently, health insurance companies and private equity firms have also gained a stronger foothold within the clinical side of the industry, buying up hospital systems and provider groups across the country, including in Washington. The current version of the bill includes language that includes more oversight of these types of deals, too.

Debate around the Keep Our Care Act has been active in recent hearings.

While supporters share unease about consolidation’s impact on a rise in health costs and reduced services, opponents argue the bill imposes too many additional requirements for health systems interested in these transactions and could discourage future deals — which could come at the expense of smaller hospitals and clinics that need financial support from larger institutions if they want to keep their doors open.

“The bill would create a substantial cost burden and oversight for anybody engaging in health care in our state, at a time where we see we have providers, big and small, who are facing real financial challenges,” said Zosia Stanley, vice president and associate general counsel of the Washington State Hospital Association, which opposes the legislation. “There may be providers who are seeking a partner in order to survive and keep being able to provide care in their community.”

Both sides, however, agree on one fact: It’s becoming more and more difficult for independent providers and smaller hospital systems to stay in business.

Washington’s hospitals lost about $1.2 billion between January and September of last year — which is about 23% less than during the same time period in 2022, but “remains a loss and follows years of losses now,” said WSHA spokesperson Beth Zborowski. In the first nine months of 2022, hospitals lost about $1.6 billion.

Hospital industry leaders have pointed to chronic government underfunding of public health insurance programs, and rising costs of medication, supplies and staffing as reasons for the financial turmoil.

But the state Office of the Insurance Commissioner thinks the growing number of health care consolidations in the state is also largely to blame. In a preliminary report the OIC published late last year, premiums rose 49% and deductibles rose nearly 79% between 2010 and 2020. Health care expenses now make up more than 20% of the state’s general fund budget.

The report noted that in 2014, four health care acquisitions occurred in the state. In 2023, the total number had grown to 97.

“Consolidation in the health care industry is a key factor driving up prices,” the report said. “Generally, consolidations do not improve quality of care, but rather, drive up prices and impact access to care for patients and working conditions for providers.”

In the last three decades, hospital resources and care in Washington have become more concentrated as more hospitals have closed or become part of multi-hospital systems. Providence Health & Services bought Swedish Health Services in 2012. The larger UnitedHealth Group, which runs an insurance branch, bought The Polyclinic and The Everett Clinic in 2018. CommonSpirit Health, the nation’s largest Catholic hospital chain, bought and merged Virginia Mason and CHI Franciscan in 2021.

While Catholic health care is often known for its high-quality, mission-driven service, its ethical and religious directives also prohibit certain types of care, including medical aid in dying, abortion, and some types of fertility treatment and gender-affirming care. Concern around the prohibitions is another reason bill advocates are pushing for more oversight of health care consolidations, especially given nearly half of Washington’s acute care hospital beds are religiously affiliated.

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Hospital industry leaders have pushed back against the finding that these consolidations have played key roles in rising health costs.

“Yes, we worry about the cost of care,” said Taya Briley, WSHA’s executive vice president and general counsel. “But often the cost of care is not actually being determined by the hospital. And the hospitals are facing this choice of either running into financial insolvency or finding a partner.”

The Keep Our Care Act aims to step in during these discussions to determine whether future mergers, acquisitions and affiliations would solely preserve local health care, or if they would reduce access or increase costs, including around emergency, primary, reproductive health, end-of-life, and gender-affirming services.

If passed, the bill would add more public discussion to the process and allow Washington’s attorney general to play a bigger role in reviewing health care transactions. If they do have negative impacts on patient care, the attorney general could impose conditions or reject transactions altogether. Those decisions would be subject to judicial review.

“The goal is not to stop these consolidations from occurring, but to ensure that if they are occurring, they are safeguarding access to quality care,” said Leah Rutman, health policy program director for the ACLU of Washington. “Certainly consolidations do have the potential to help communities in some instances.”

If a transaction is necessary to maintain an organization’s financial health, the bill specifies that the attorney general must take that into consideration when reviewing the case.

While Rutman doesn’t see the additional requirements for hospitals included in the bill as “excessively extensive,” hospital industry leaders disagree.

The bill includes three levels of requirements for organizations involved in transactions, depending on who’s involved in the deal and how large they are. For those that generate less than $25 million in health care revenue, the list is fairly straightforward. They must send the attorney general’s office the names and business addresses of involved parties, locations of clinics and facilities, descriptions of the nature and purpose of the transaction, and the anticipated effect date of the transaction.

For larger organizations, they must also submit financial statements from the past three years, board of director statements that detail the anticipated effect of the transaction, community health needs assessments, information on charity care provided in prior years, billing and debt collection policies, staffing policies, and policies around certain types of care (including reproductive health, end-of-life and gender-affirming), among other pieces of information.

Existing state law already requires parties involved in health care transactions to provide notice and certain documentation about the deal to the attorney general’s office, which can then request additional information, but a number of requirements in the Keep Our Care Act are new.

Doug Ross, a law professor at the University of Washington who teaches classes on antitrust and health care, argued in testimony last week that the bill focuses too much on past consolidations that have already been wrapped up.

“It aims to stop deals that are over,” Ross said during a House Civil Rights & Judiciary committee hearing. “The future will bring different deals — struggling providers trying to join larger systems to stay afloat. The bill stops these deals.”

In an interview, Ross said federal antitrust and existing state consumer protection laws already keep an eye on potentially anti-competitive mergers and acquisitions, and that the bill could turn these reviews into a “simple, regulatory block.”

But others who have testified in support of the bill brought up other possible long-term downsides of continued consolidation of health care — like fewer independent providers in the state and increased presence of insurers in hospital and clinic ownership.

“Profits should not be made off illness,” said Dr. Kjersten Gmeiner, a family physician who’s spent the last 25 years working in hospitals, and large and small groups, and solo practices.

“The insurance companies, whose profits are larger if they provide less care, have bought care delivery,” Gmeiner said. “That’s huge. In the for-profit financial model, the less care given to patients, the more money is made. It’s a huge national conflict.”

She advocates greater state responsibility in preserving some basic services, like preventive medicine or pediatric care — similar to policies in Oregon — though she acknowledged that model wouldn’t be able to support certain treatments for everyone.

While national health systems and big insurance companies are causing anxiety for providers, some remaining locally owned hospital systems worry they’re caught in the middle.

Dr. Andrew Jones, CEO of Wenatchee-based Confluence Health, said he thinks the bill would make it harder for his independent health system to establish ongoing rural partnerships. The extra requirements, which even smaller hospital systems like Confluence would have to follow, would likely not be worth the time and effort, he said.

“You could go back and forth a long time, incurring legal fees and data collection that could really prolong these transactions,” Jones said. “My worry is that it just wouldn’t be worth the bother to engage in a transaction to help out a practice that is struggling.”

The bill was referred to the House Appropriations Committee Thursday, and must receive approval from the committee by Monday in order to make it to a House floor vote.