The health care market in the United States has become increasingly consolidated, resulting in systems of hospitals and providers with complex ownership relationships. This landscape reflects a decades-long rise in mergers, acquisitions, and joint ventures among health care entities as well as the relatively recent emergence of private equity as a major investor in health care. Research findings indicate these changes can increase health care costs and undermine quality of care.
Given the importance of high-quality and affordable health care, state policymakers are working to understand these evolving business dynamics and are seeking to mitigate the potential negative consequences for consumers and the provider workforce. In their responsibility to protect consumers and support a strong local economy, state officials want to ensure health care affordability while supporting the financial viability of hospitals and other providers. State officials are developing and pursuing policy initiatives aimed at health market oversight as a way to increase affordability, while ensuring access.
This toolkit offers resources that highlight existing state initiatives to increase provider market transparency and oversight, as well as comprehensive model legislation developed with state leaders that provides enhanced market oversight authority, ownership transparency, and protection of practitioners. To support states in their efforts to understand their health care markets, NASHP will update this toolkit with additional materials on an ongoing basis.
State Activity
As state policymakers seek to address new and evolving health care market dynamics, they are taking lessons from existing tools and efforts. In some instances, officials are seeking to expand existing market oversight authority, and others are supplementing or replacing existing programs such as certificate of need with new policies.
State Market Oversight Landscape
Federal anti-trust law requires that companies notify and potentially undergo review by the Federal Trade Commission for ownership transactions whose value exceeds a certain monetary threshold; most states have similar laws. However, even with these laws, consolidation has proliferated the health care market typically through transactions that do not meet the federal and/or state anti-trust criteria. Some states have supplemented anti-trust laws with policies specific to health care entities and others have enacted additional health market oversight authority.
State market oversight laws vary in their scope, including the power of oversight afforded to the state (i.e., review and/or approval), as well as which entities and transactions are considered (i.e. mergers and/or financial investments in hospitals/providers). The following charts offer a snapshot of states’ enacted health care market oversight laws.
For more detailed information on these states’ market oversight laws, the below chart notes per state: the relevant health entities, review criteria, the responsible state agency, and levels of authority to review and/or consider a proposed transaction, etc.
Transaction review is a strong regulatory tool to address consolidation and its effects on health care delivery systems. However, many states have not enacted review authority and may rely on other policies to gain insight into their health care markets. Certificate of need (CON) programs are historically a default mechanism by which states look to better understand their health care delivery landscape.
State Certificate of Need (CON) Landscape
Certificate of need (CON) laws, established decades ago, require that a designated state agency be notified of and assess whether certain potential changes in services provided by health entities meet a demonstrated community need. State CON laws require health care entities, as defined in a state’s statute, to gain approval from the state to open a new facility; to expand services offered at an existing facility; and to allow states to identify whether expanded services or additional capital expenditures would be in service of residents.
Although two-thirds of states still operate CON programs, increasingly states are exempting hospitals and medical providers from the program. So the program’s reach is more limited. State policymakers restricting CON often cite the goal to encourage greater competition in the market, and they note that, as designed, CON doesn’t capture investment transactions nor many of the affiliations that are currently increasing consolidation. However, states that operate more comprehensive CON programs support them to maintain some level of market insight.
The chart below summarizes existing CON laws and captures the wide variation in the facilities and actions subject to review, the allocation of state review authority, and the criteria considered during review.
This brief discusses how states can develop a comprehensive approach to address consolidation through policies that increase transparency and oversight of the business dynamics within the market. The brief highlights how policies like CON and/or market oversight work separately and together to support goals to minimize potential negative consequences of consolidation.
Additional NASHP Resources
NASHP has published a variety of resources to support state policy learning, development, and implementation around consolidation and market oversight.
With guidance, insight, and feedback from state officials, NASHP recently developed comprehensive model legislation to address corporatization of health care, consolidation, and closures across the health care market. This legislation includes increased oversight of health market transactions (including private equity investments), ownership transparency, closure notifications, corporate practice of medicine provisions to protect practitioner autonomy, and more. States can use and adapt all or some provisions to enhance their insight into the health care market and their regulatory abilities.
This blog explains the context for the work with state officials to develop model legislative language and highlights the provisions within it.
Hospital and Health System Cost Legislative Tracking
NASHP tracks state legislation introduced to address health care costs throughout each legislative session. This tracker is updated regularly with new bills and status updates as measures move through state legislatures. Users can view the “Competition” and “Certificate of Need” categories to state policymaker action on consolidation and the health care market.
This tracker contains state laws enacted to address health system costs since 2020 and includes direct links to the codified statutes. This resource offers users additional information on the laws passed related to CON programs and transaction review that are highlighted in the above charts.