Overview

Consolidation among healthcare providers continues to be a significant contributor to high healthcare prices while also having questionable effects on the quality of and access to health care. States across the country have utilized various legal authorities to address hospital and health system mergers, acquisitions, and other consolidating transactions and the potential harm these transactions can bring. In attempting to balance multiple, and sometimes competing priorities, state officials who are tasked with reviewing and deciding whether to permit a transaction to proceed, have often utilized their authority to conditionally approve transactions. By conditionally approving transactions, transactions are allowed to proceed but with requirements and restrictions on their behavior post-transaction. This key issue page examines conditional approvals imposed under certificate of need programs, attorney general oversight through nonprofit and antitrust laws, and oversight authority granted to other state agencies such as state departments of health.

For more information, read the Frontiers in Public Health paper “Considerations for state-imposed conditions on healthcare provider transactions” for an overview of state healthcare transaction conditional approval authority, a taxonomy of state-imposed conditions, and considerations and recommendations for states in imposing conditions for the effective use of conditions.

State Conditional Approval Authority

Menu of Conditions

The following options below represent the major areas of concern state officials have addressed with conditions. Click on each option to see examples of the types of conditions imposed.

  • Competition and Price—conditions aimed at preventing post-transaction price increases or other anticompetitive behavior, including the use of certain contracting provisions.
  • Access to Care—conditions to preserve or enhance access to care by protecting the continued operation of hospitals and of certain services as well as through provisions ensuring all populations have equal access to care.
  • Quality of Care—conditions to monitor or improve the quality of care post-transaction.
  • Workforce—conditions to protect providers and hospital staff post-transaction.
  • Community Benefits—conditions imposing requirements regarding charity care, community benefits programs, and other initiatives for community involvement.
  • Post-Transaction—conditions to monitor any post-transaction changes including changes to access or additional transactions the entities may become involved in as well as conditions to monitor compliance with the conditions imposed.

Price
  • Prohibit price increases exceeding state’s Cost Growth Benchmark
  • Prohibit price increases exceeding certain percentage in contract renewals
Competition
  • Prohibit anticompetitive tying and/or all-or-nothing contracting practices
  • Prohibit anti-tiering/anti-steering provisions
  • Prohibit Most-Favored-Nation clauses
  • Prohibit noncompete clauses
  • Prohibit exclusive contracting
  • Payers may request separate negotiations or firewalls
  • Prohibit imposing system-wide rate unless payer proposes it

Access to Services
  • Must keep hospital open
  • Must remain as current hospital type (general acute care, psychiatric, etc.)
  • Maintain all or specific set of services at current level
  • Must maintain 24-hour emergency room
  • Must maintain reproductive care services
  • Must notify state oversight officials of any reductions or changes to services
Equal Access to Care
  • Must participate in state Medicaid program
  • Intiatives to increase number of Medicaid patients
  • Must provide same types and levels of services to Medicare benficiaries
  • May not discriminate based on patient’s ability to pay or payment source
  • Prohibits discriminatory practices relating to provision of health care services to patients and the release of patients’ electronic medical records
  • May not discriminate based on personal characteristics (such as gender, sexual orientation, ethnicity, age, disability, etc.)
  • Must provide culturally and linguistically appropriate services

  • Must submit annual reports on quality and outcome measures
  • Must appoint evaluation team to monitor quality of care
  • Require behavioral health quality improvement program with measureable outcomes
  • Must participate in health information exchanges (platforms that collect data on quality)
  • Notify state oversight officials of changes to quality programs
  • Must submit a plan detailing how savings reported will be used to improve quality and access
  • Must implement quality of care initiatives
  • Report improvements in quality outcomes attributable to transaction
  • Report on quality of care initiatives, such as admission prevention, monitoring, C-sections, alcohol-use screenings, emergency department statistics

  • Requirement to retain all or most employees post-transaction
  • Provide state oversight officials with notice of any planned reductions in workforce
  • Prohibit changes to employee benefits
  • Prohibit noncompete clauses
  • Maintain privileges for medical staff in good standing
  • Require initiatives for physician recruitment

Charity Care
  • Require minimum amount that must be spent on charity care
  • Must maintain a charity care policy and inform patients of policies relating to financial assistance
  • Maintain current charity care policy, provide written notice of any changes to oversight entity
  • Provide free or discounted care to low income patients (ex. 175% of federal poverty guidelines)
Community Benefits
  • Require minimum amount that must be spent on community benefit programs
  • Maintain current community benefit programs
  • Require investment in programs to improve public health and community health services
  • Conduct community health needs assessments
  • Initiatives to ensure community involvement in decision-making

Notice of Post-Transaction Changes
  • Provide notice of any future transactions
  • Provide notice of agreements such as the sale and leaseback or any other encumbrances of real estate
  • Provide notice of any planned changes to services (addition, reduction, elimination, relocation)
  • Provide changes to charity care/indigent care policies
  • Provide notice of any changes to charity care/indigent care policies that result in increased costs to consumers
  • Annual reporting of changes in payer mix and whether it has had an impact on access
Post-Transacton Compliance
  • Annual report on compliance with conditions
  • Appoint an independent monitor to monitor compliance
  • Report on implementation of proposed efficiencies from the transaction
  • Report on access, quality, and cost of health services
  • Provide annual audited financial statements that clearly identify financial performance (balance sheet, income statement, utilization data)
  • Prepare evaluation and audit of patient and employee safety conditions and anually report any safety incidents
  • Report on implementation of certain promised initiatives
  • Report on capital investments
  • Report quality improvements attributable to transaction
  • Report cost savings attributable to transaction

Conditional Approval Cases

About the Project

With support from Arnold Ventures, this project leverages the latest and most comprehensive data on state laws and enforcement cases to examine conditional approvals imposed under certificate of need programs, attorney general oversight through nonprofit and antitrust laws, and oversight authority granted to other state agencies such as state departments of health.

If you would like to report a possible data discrepancy, please email info@sourceonhealthcare.org or contact The Source here.