The tide is turning on healthcare megamergers

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Madeline Ashley – Becker’s Hospital Review

Proposed healthcare mergers and acquisitions are continuing to face backlash from hospital and physician groups along with state and federal lawmakers — signaling a turn of the tide against megadeals.

In 2023 alone, Becker’s reported on 10 called-off or unwound hospital deals, many of which were in part due to a Federal Trade Commission intervention, state regulatory reviews, and the financial and economic environment.

Most recently, just as Blue Cross and Blue Shield of Louisiana paused its proposed $2.5 billion sale to Elevance Health, Portland-based CareOregon and Long Beach, Calif.-based SCAN Group also diffused their plan to merge under the name HealthRight Group.

The two deals had been met with state official and public criticism.

Prior to BCBS Louisiana’s sale withdrawal, state lawmakers shared a letter that detailed 30 concerns over the proposed sale. The Louisiana State Hospital Association and state treasurer also shared resistance over the deal.

CareOregon and SCAN Group shared that while their merger intent was to support Oregon’s healthcare system and its people, their decision to dissolve the application came amid mounting questions over their planned combination.

While some deals are falling though, others are receiving heavy pushback, like Optum’s proposed acquisition of Corvallis (Ore.) Clinic, a physician-owned group. 

The Oregon state department of health has been urged by hundreds of people, including patients, physicians and Oregon Senate Majority Whip Sara Gelser Blouin, to block the purchase due to fear over large companies like Optum cutting corners, putting patient well-being at risk, and operating on the edge of legality.

After the Federal Trade Commission and the Justice Department filed 50 merger enforcement actions in fiscal year 2022, many healthcare and political leaders are not letting their foot off of the gas when it comes to tightening rules and restrictions to hold large healthcare companies accountable.

While the FTC has added cross-market theory questions to second requests in merger investigations, it has yet to challenge a hospital or health system transaction formally based on a cross-market theory of competitive harm, according to McDermott Will and Emery’s “Hospitals and Health Systems 2023 Outlook.”

Should the FTC attempt to challenge this kind of merger, it would probably need to prove that health systems had overlapping payer customers. Regarding health system mergers across state lines, the same payer would need to operate across multiple states or the systems would require payer contracts for material national contracts.

“Empirical research shows that hospital consolidation routinely results in higher costs and reduced service, and the FTC has long been active in tackling these illegal deals,” Federal Trade Commission Chair Lina Khan said in Feb. 14 remarks. “The FTC has successfully blocked seven healthcare mergers in the last two years alone. Our actions are putting industry participants on notice.”