House OKs beefed-up state oversight of proposed health care sales, mergers

(CORRECTION: The original post said the Health Department, in consultation with the attorney general would prohibt a transaction. It is the Office of the Attornety General with Health Department consultation.)

REFILED MAY 9, 2023: Additional state oversight of health care business transactions could occur by requiring a review of a proposed sale or merger of two hospitals or health care systems – and blocking them if deemed detrimental to the public or reduced health outcomes for Minnesotans.

Along party lines, a bill to require that was passed 70-61 by the House Monday. Sponsored by Rep. Robert Bierman (DFL-Apple Valley), HF402 now goes to the Senate.

Although the original impetus for the bill was to scrutinize the potential merger between Minnesota-based Fairview Health Services and Sioux Falls-based Sanford Health, Bierman said the bill’s scope is now much larger.

The time is right for the Legislature to set guidelines in law to oversee all large hospital mergers and health care system sales that might reduce the quality of health care in the state or access to it, he said. “Mergers and acquisitions continue to raise costs as they roll across the country, and they are coming to Minnesota, too.”

The attorney general, in consultation with the Health Department, would prohibit a transaction by a health care entity that would substantially lessen competition or tend to create a monopoly or monopsony – a market structure in which a single buyer substantially controls the market.

Only hospitals or health care systems with annual revenues of $40 million or more would be subject to the bill.

The bill would also prohibit University of Minnesota health care facilities, including its partnership with M Health Fairview, from being owned or controlled by a for-profit or out-of-state entity, unless the attorney general, in consultation with the commissioner of health and university’s Board of Regents, determine such ownership or control is in the public interest.

“U of M medical facilities are at the center of public health efforts in Minnesota. It is imperative that we keep this asset focused on the dedicated mission to health care education and to improve the health of all Minnesotans for generations to come,” Bierman said.

The bill would appropriate $2.4 million in the 2024-25 biennium, plus $710,000 in ongoing fiscal years, for the Department of Health to review proposed sales or mergers of two hospitals or health care systems.

If the Health Department disapproves a transaction or a deal is approved with conditions, either partner could appeal the decision in district court.

The attorney general’s office would be given expanded enforcement and supplemental authority and could bring an action in district court if the office determines a health care organization violated provisions in the bill.

A third major provision would require that a Minnesota-licensed nonprofit HMO, or a health system organized as a charitable organization being sold to an out-of-state nonprofit entity or to any for-profit entity, would have to return to the state the value of any charitable assets they received from the state.

Although Republicans offered no amendments, they are not on board with all bill provisions.

Rep. Duane Quam (R-Bryon) said there’s a danger that giving the state oversight and control over health care system transactions could leave patients without any health care if a hospital losing money can’t merge with a wealthier partner.

“You can’t treat patients if you are closed,” he said.

Quam said he is disappointed the criteria used to assess potential mergers or sales don’t consider what happens if a blocked merger would reduce health care options.