State gets oversight over health care mergers, power to stop those ‘contrary to the public interest’

A new law requires the Department of Health to analyze all proposed sales or mergers of two hospitals or health care systems to determine whether they are in the public interest and stop them if they aren’t.

The law requires a health care entity with an average revenue of at least $80 million per year to notify the Health Department within 60 days of a proposed merger or sale and submit the details of the proposed transaction, which could not proceed without approval from the department.

The attorney general’s office is given expanded enforcement and supplemental authority and could bring an action in district court if the office determines a health care organization did not meet the notification requirements.

In addition, the attorney general, in consultation with the Health Department, can prohibit a transaction by a health care entity that is “contrary to the public interest,” would substantially lessen competition, or tend to create a monopoly or monopsony – a market structure in which a single buyer substantially controls the market.

Sponsored by Rep. Robert Bierman (DFL-Apple Valley) and Sen. Melissa Wiklund (DFL-Bloomington), the law took effect May 27, 2023, unless otherwise noted.

Public interest criteria

Factors for the attorney general and the Health Department to consider when determining whether a health care sale or merger is contrary to the public interest include whether the transaction will:

• harm public health;

• reduce the affected community’s continued access to affordable and quality care and to the range of services historically provided by the entities or will prevent members in the affected community from receiving a comparable or better patient experience;

• have a detrimental impact on competing health care options within primary and dispersed service areas;

• reduce delivery of health care to disadvantaged, uninsured, underinsured, and underserved populations and to populations enrolled in public health care programs;

• have a substantial negative impact on medical education and teaching programs, health care workforce training, or medical research;

• have a negative impact on the market for health care services, health insurance services, or skilled health care workers;

• increase health care costs for patients;

• adversely impact provider cost trends and containment of total health care spending;

• have a negative impact on wages paid by, or the number of employees employed by, a health care entity involved in a transaction; or

• have a negative impact on wages, collective bargaining units, and collective bargaining agreements of existing or future workers employed by a health care entity involved in a transaction.

Other provisions

The law prohibits University of Minnesota health care facilities from being owned or controlled, directly or indirectly, in whole or in part, by a for-profit entity or an out-of-state entity, unless the attorney general determines that ownership or control by a for-profit entity or out-of-state entity is in the public interest. This applies to transactions related to transferring ownership or control of the University of Minnesota health care facilities that are completed on or after May 27, 2023.

The expiration of the moratorium on nonprofit health service plan corporations (health maintenance organizations) converting to for-profit organizations via outright conversions or mergers is expanded from July 1, 2023, to July 1, 2026.

The Department of Health must study and develop recommendations on the regulation of conversions, mergers, transfers of assets, and other transactions affecting Minnesota-domiciled nonprofit health maintenance organizations and for-profit health maintenance organizations. Preliminary findings are due to the Legislature by Jan. 15, 2024, with a final report and recommendations due by June 30, 2024. This section takes effect Aug. 1, 2023.

Effective Jan. 1, 2024, health care entities with average revenue between $10 million and $80 million per year must notify the Health Department of any impending mergers or sales and submit details on them. The department will not have oversight over these smaller-scale proposed transactions, nor will the attorney general have power to stop them. The department will instead use the data “to analyze the number of health care transactions in Minnesota and the potential impact these transactions may have on equitable access to or the cost and quality of health care services, and develop recommendations for the Legislature on improvements to the law.”

HF402*/SF1681/CH66

HF0402* / SF1681 / CH66