Nonprofit Health Care Update: Bankruptcies, a Failed Merger, and Continuing Consolidation

It is difficult to keep up with the constant flow of news relating to nonprofit health care providers. The past two weeks alone saw these stories:

• The Wall Steet Journal reported (subscription required) that “California Nonprofit Hospitals Turn to Bankruptcy for Leverage Against State.” According to the article, nonprofit hospitals in California are using bankruptcy filings to push the state’s Attorney General’s Office to consider permitting sales or mergers that otherwise might not make it through the state’s review system for such transactions.

• In South Dakota, a second attempt to merge nonprofit rural health system Sanford Health with the Minnesota-based M Health Fairview (associated with the University of Minnesota) failed according to a report by Dakota News Now titled “What’s next for Sanford, Fairview after merger falls apart?” According to the story, at least one of the obstacles was Minnesota legislation requiring additional due diligence by state officials before any merger. Additional coverage: Fierce HealthcareMPR News.

• A N.Y. Times opinion piece by a former physician who now works for KFF Health News titled “Your Exorbitant Medical Bill, Brought to You by the Latest Hospital Merger” (subscription required) details both the extent and perhaps the inevitability of health care consolidation. It notes that 75 percent of health care markets are now considered highly consolidated. The FTC has recently become more active in blocking mergers, stopping seven in the past two years, but this has occurred while 53 mergers and acquisitions went forward in 2022. And state legislatures can help protect healthcare systems from antitrust scrutiny by passing so-called Certificate of Public Advantage laws.

Lloyd Mayer