Concerns about private equity owners drove hospital bill

SANTA FE — A proposed hospital network and health plan merger that would have created an $11 billion health care giant fell apart on the way to the altar last year.

But the deal between Albuquerque’s Presbyterian Healthcare Services and Iowa-based UnityPoint Health did, in a way, give birth to another big change in New Mexico’s health care landscape: legislation giving state government final word over all hospital mergers and acquisitions.

The New Mexico Office of Superintendent of Insurance, as the name suggests, already regulates the insurance industry, including transactions like mergers and acquisitions, said Colin Baillio, New Mexico’s deputy superintendent of insurance. That included the proposed Presbyterian merger, which involved the company’s health plan business.

“As we were looking at that, it came to our attention that there really wasn’t any state agency that was overseeing [hospital mergers],” said Baillio, whose office brought the idea for the Health Care Consolidation Oversight Act to lawmakers.

Rep. Reena Szczepanski, D-Santa Fe, said the lack of oversight was a concern because of a trend of acquisitions by out-of-state and private equity firms that critics say prioritize profits above all else.

“The pace of these acquisitions by out-of-state entities has really picked up,” said Szczepanski, who co-sponsored Senate Bill 15 with Sen. Katy Duhigg, D-Albuquerque. “We’ve seen at the same time a drop in availability of services ... all over the state.”

The pared-down version of the measure, which now is awaiting Gov. Michelle Lujan Grisham’s signature, gives the Office of Superintendent of Insurance oversight of changes in hospital ownership for the next 16 months.

Sponsors, the superintendent’s office and health care industry representatives said they plan to work on a more permanent version of the measure before next year’s legislative session.

The office will have to consider a number of factors, including whether the deal would reduce or eliminate access to essential services, drive up costs, affect “availability, accessibility and quality” of health care to the local community, or whether it could stifle competition. The office could then approve the deal outright, approve it with conditions or, in what Duhigg said she considered “the very rare case,” block the transaction.

“We’re not trying to put people out of business here,” said Duhigg, who pointed out only 10 other states don’t currently regulate hospital mergers and acquisitions. “... The point of Senate Bill 15 is to make sure that someone is looking at these transactions and doing an analysis on how it’s going to impact health care for New Mexicans.”

...

Concerns about mergers

New Mexico has plenty of hospitals owned by out-of-state entities or private equity firms. The Private Equity Stakeholder Project reports 17 New Mexico hospitals, or about 38 percent, are owned by private equity firms — the highest proportion of any state.

Those holdings include Mimbres Memorial Hospital in Deming as well as four of five hospitals in Las Cruces plus Peak Behavioral Health Services in Santa Teresa.

That’s part of a larger national movement that’s resulted in some troubling trends. Harvard University researchers released a study last year that indicated patients “are more likely to fall, get new infections, or experience other forms of harm during their stay in a hospital after it is acquired by a private equity firm,” according to one release about the study.

Duhigg said whether a hospital merger involves a private equity firm or simply a non-local private owner, the concern is that profit will drive decision-making.

“There is often either a reduction in services altogether ... a reduction in the quality of services that are offered, and often an increase in price,” Duhigg said.

While those trends have been true nationally, she added, New Mexico leaders don’t have a lot of data to show that’s happening here because of the lack of regulation of hospital ownership transactions.

“Right now, we really don’t know how it’s impacting New Mexicans other than ... what we hear word of mouth,” she said.

Szczepanski pointed to the recent acquisition of Gerald Champion Regional Medical Center in Alamogordo by Texas-based Christus Health, the Catholic health group that also owns Christus St. Vincent Regional Medical Center. In the weeks leading up to the merger, community members raised concerns about whether they would lose access to reproductive health care, media outlets reported at the time.

Christus Health declined an interview for this story and didn’t respond to a question about those concerns. Instead, it issued a statement pointing to its 15-year track record with its Santa Fe hospital, which it described as “incredibly successful” for both patients and staff.

“CHRISTUS Health has demonstrated its commitment to deeply invest in the state of New Mexico and in the health and well-being of the communities we serve,” spokeswoman Leigh Strope wrote in the statement.

...

Industry’s perspective

The health care industry’s initial response to Senate Bill 15 wasn’t exactly full-throated support.

New Mexico Superintendent of Insurance Alice Kane said the measure was based on Oregon’s comprehensive model, but she believes the plan came together too late this year.

“I think the hospitals needed more time to digest it,” Kane said.

The New Mexico Hospital Association at first opposed the bill, which as initially proposed included other types of health care organizations as well as hospitals, contained a larger community review element and did not include a sunset date. By the time the paring-down was through, the group was on board, and Troy Clark, the association’s president and CEO, said he’s committed to working with sponsors over the next year on a more permanent measure.

“There are just a lot of challenges that have to be worked through,” he said.

Clark said his members are concerned about what it will cost to go through the review process and whether the decision is being made “on an objective, not subjective, basis, regardless of who’s in office” at the time. He also said they’re worried about having to go through a lengthy review if they’re considering a merger for financial relief.

Duhigg said even the first version of Senate Bill 15 included allowances for expediting approval of mergers involving hospitals that were in danger of shutting down. Clark said he’d like to see that available to hospitals that are in financial turmoil but not necessarily on the brink of closure.

Leaders of Presbyterian Healthcare Services declined an interview for this story, but CEO Dale Maxwell said in a written statement the organization is looking “forward to participating in continued discussions during the interim.”

Clark said he understands concerns about private equity ownership but added in New Mexico “we have good evidence that it can be done successfully.”

He pointed to Lovelace Health System, which is owned by Ardent Health Services, as one example of a hospital system with high-quality scores and strong local ties.

“We need all of the hospitals that we’ve got, and they are huge contributors to their communities,” he said.

The Las Cruces Bulletin contributed to this report.