HARRISBURG — A bill that would further empower Pennsylvania’s Attorney General to deny hospital mergers and acquisitions that are found to harm the public interest, strengthening existing oversight, advanced Wednesday within the state House of Representatives.
The proposed legislation would codify and expand the Attorney General’s existing powers under laws governing nonprofit organizations and consumer protection into the Health Care Facilities Act.
The intent is to disrupt a pattern of hospital closures following changes in ownership and the ensuing fallout of declining access and quality of care coupled with higher patient costs and a lack of competition in the marketplace.
According to a primary sponsor of the bill, Rep. Lisa Borowski, D-Delaware, 14 out of the past 15 hospital closures in the commonwealth were preceded by a merger or acquisition.
“I think this is a really good step to put a limit on these mergers and acquisitions and these hospitals being bought sometimes by for-profit private equity corporations that have no interest in improving health care, just making more money,” Rep. Tarik Khan, D-Philadelphia, a nurse practitioner, said Wednesday during a meeting of the House Health Committee.
Committee members cast identical 16-9 votes to both amend and advance the bill. Republican Reps. David Rowe, R-Snyder/Union/Juniata/Mifflin, and Dawn Keefer, R-York, joined all 14 Democrats in support. Rowe and Keefer said their votes were contingent on additional amendments in the works to further adjust the bill, something that other Republicans said could shift their vote to one of support on the House floor.
More warning
Under House Bill 2344, hospitals and health systems would be required to provide advance state-level notification and accompanying documentation of mergers and acquisitions of at least $10 million, similar to a federal requirement — a growing interest among states seeking stronger supervision of decisions impacting health care quality and access. Indiana enacted a similar reporting requirement into law in February, joining at least 13 other states including New York.
Pennsylvania currently doesn’t have state-level notification or a state anti-trust law in place.
The Attorney General’s Office routinely reviews mergers and acquisitions and can challenge such transactions in court under federal anti-trust powers. It also reviews transactions under laws governing charitable operations and consumer protection, though the extent is limited.
The pending bill would establish in state law the Attorney General’s power to deny a merger or acquisition, leading to a court challenge. The state office could also permit the transaction if it’s found to be the only feasible solution to avoiding a closure and loss of service.
The bill was amended in the House Health Committee to specifically define what it means for a transaction to be “against the public interest” — reduced competition or increased patient costs, unfair methods of completion, reduced quality of care or access to care, and reduced care to people living in rural, low-income or disadvantaged communities.
A 90-day wait period would be established including terms for public input and a public meeting. Merging entities would be responsible for fees charged to the attorney general by third-party contractors aiding a transaction review, and would be subject to fines of $10,000 daily for noncompliance.
Opponents: Bill would hurt struggling hospitalsRep. Tim Bonner, R-Mercer/Butler, who previously served on boards of directors for UPMC and the Allegheny Health Network, said the expanded powers and associated costs of review by the attorney general could burden hospitals already on the brink of fiscal collapse. He said Pennsylvania hospitals provide about $1 billion annually in uncompensated care for uninsured and underinsured patients including those enrolled in Medicaid and Medicare.
“That’s a major reason why 51 percent of our hospitals in fiscal 2023 reported a loss of income from operations,” Bonner said.
“Frankly, if we’re going to examine anyone we should be examining ourselves for a failure to meet the charge to assist our hospitals in providing the care they’re rendering to our communities, and that is the primary reason why these hospitals are having to merge,” he said.
The Health Committee’s minority chair, Rep. Kathy Rapp, R-Warren/Crawford/Forest, said mergers and acquisitions are often the lifeline for hospitals on the brink of closure. She took particular exception with the fine structure and fee reimbursem*nt, saying it would exacerbate the financial issues.
According to the Hospital and Healthsystem Association of Pennsylvania (HAP), more than 25% of Pennsylvania’s rural hospitals operated with a negative margin in 2022 and another 14% barely broke even.
HAP is among the organizations opposed to the proposal. In a letter to the committee, it cited a potential chilling effect on mergers and acquisitions that could keep struggling hospitals in operation.
SEIU Healthcare Pennsylvania is among the supporters. The union said in a statement following Wednesday’s meeting that the bill could counter a “crisis of growing monopoly power” in health care and resulting damages not only to patient care and access but also to provider wages and jobs.
“The benefits of competition are real. It’s been known to drive high quality care, reduce costs and promote innovation. Without competition driving improvements, we are left to regulate our way towards those goals and that is a lot harder,” Majority House Health Committee Chair Rep. Dan Frankel, D-Allegheny, said.
