Some health care companies are abandoning hospital deals

Anna Claire Vollers, Tribune News Service

Worried about hospitals closing and higher costs for patients, state lawmakers are increasingly tangling with hospitals over potential health care mergers, in some cases derailing deals they think don’t serve the public interest. Financially strapped hospitals often look to merge with or be acquired by other systems. After a pandemic-era slowdown, health care mergers and acquisitions have risen steadily over the past two years. But some proposed hospital deals in Connecticut, Louisiana, Minnesota and elsewhere have fizzled amid heavy pushback from lawmakers, organized labor and grassroots organizations. At least 10 health care “megadeals” were called off or unwound just last year, due in part to increased oversight, reported Becker’s Hospital Review, an industry publication.

“We have seen situations nationally in certain health care transactions where a lot of promises were made, but when you look into it, clinics are closing, prices are going up, access is down,” Minnesota Attorney General Keith Ellison, a Democrat, told Stateline. Ellison was in the middle of campaigning for reelection in late 2022 when he learned that Minnesota-based Fairview Health Services intended to merge with Sanford Health, a larger South Dakota-based health care system. The proposed deal drew intense criticism from Minnesota’s Democratic legislators, from nurses unions, University of Minnesota leaders and community groups. Fairview owns the University of Minnesota Medical Center, which is funded by state taxpayers. If the systems merged, Minnesota tax dollars might be spent across state lines. Some legislators also argued the resulting system would create a local health care monopoly that could lead to fewer services and higher costs for patients. As the Fairview-Sanford deal chugged along, Ellison’s office held public listening sessions across the state. And while Fairview and Sanford officials said the merger would allow the systems to expand care and some residents expressed support for the deal, the overall sentiment from stakeholders was negative, Ellison recalled.

Meanwhile, Democratic lawmakers passed a bill in May 2023 that bans anti-competitive health care mergers and strengthens state oversight of potential deals. It was signed into law that month. Two months later, Sanford Health called off the merger due to lack of support from “certain Minnesota stakeholders.”

Financially struggling hospitals In March 2023, Massachusetts-based Covenant Health called off its plan to purchase a smaller, struggling health care system in the rural northeast corner of Connecticut. More than a quarter of announced health care deals in the United States last year involved a financially distressed partner, according to consultancy KaufmanHall. Community groups rallied against the deal, concerned that Covenant’s takeover would lead to cuts in reproductive care and other services. Covenant is a Catholic system and follows a set of rules called the Ethical and Religious Directives for Catholic Health Care Services, which forbids the system from providing some types of health care. Those include emergency contraception, fertility services, gender-affirming care, abortion and some end-of-life care.

“My concerns were really rooted in the fact that it was a Catholic-affiliated health care institution that follows Catholic directives,” Connecticut state Rep. Jillian Gilchrest, a Democrat, told Stateline. “That region of the state already has limited health care options, and one of the Planned Parenthood clinics in that area had recently closed. “There was a concern that women in the northeast corner of Connecticut wouldn’t have access to reproductive health care.” Some area residents worried they’d lose their hospital without Covenant’s takeover, but others formed a coalition that called on the state to deny the proposed acquisition. Gilchrest joined 15 other Democratic state legislators in signing a letter opposing the deal. It fell through a few months later. Covenant President/CEO Steve Grubbs said in a statement announcing the deal’s cancellation that “the affiliation was no longer financially viable.”

Day Kimball Healthcare CEO R. Kyle Kramer said the system’s leadership was “ disappointed” by Covenant’s decision not to acquire it, in a statement he released shortly after it was announced. “We are immediately pursuing the best path forward for Day Kimball and look forward to working with local and state officials as well as exploring discussions with other potential future partners to preserve essential hospital services in the northeastern Connecticut community,” Kramer’s statement read. Gilchrest said she hopes Connecticut lawmakers will do more to protect services being eliminated following some hospital mergers, particularly women’s health services.

“Unfortunately, I feel like we have not been able to go far enough yet,” she told Stateline. “As a result of many of these mergers, when it comes to women’s reproductive health care, we continue to see the closure of services like labor and delivery units across Connecticut.”

This year in Louisiana, pushback from state lawmakers and community groups paused a proposed $2.5 billion sale of the nonprofit Blue Cross and Blue Shield of Louisiana to for-profit insurance giant Elevance Health. Blue Cross had defended the proposed sale by saying it would help the nonprofit insurer slow rising health care costs and better compete with its national rivals. Last month, Louisiana state senators sent a report to the state insurance commissioner outlining dozens of concerns over the fairness of the deal, alleged attempts by Blue Cross to influence policyholders’ votes, and Elevance’s “troubled” history of fines, penalties, lawsuits and premium increases. The Louisiana Hospital Association, other medical groups and the state treasurer also opposed the deal. Louisiana state Sen. Jeremy Stine, a Republican, said he plans to introduce a bill this legislative session that would prevent deals like the proposed Blue Cross sale from taking effect without meeting certain consumer protection standards.

“The proposed Blue Cross Blue Shield sale to Elevance Health has raised concerns about the potential consequences for Louisiana’s healthcare landscape,” Stine said in a statement sent to Stateline. “By implementing these safeguards, we aim to prevent any undue influence, personal gain, or hasty decision-making that may compromise the health and well-being of our community.” Back in Minnesota, the attorney general’s office has reviewed nearly a dozen proposed health care transactions since the new law passed less than a year ago.

“Before this law was passed, we did not get advance notice (of a merger or other transaction) unless the parties told us,” said Elizabeth Odette, manager of the antitrust division at the Minnesota AG’s office. “Sometimes that meant there was not a whole lot we could do, meaningfully, before the parties completed the transaction.” But the stronger law has allowed “not only our office but the public and the (involved) parties to take a little more time to consider the implications of a proposed large merger,” she said.