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New law gives state officials more oversight on hospital acquisitions

Gerald Champion Regional Medical Center in Alamogordo, New Mexico.
Danielle Prokop
Source NM
Gerald Champion Regional Medical Center in Alamogordo, New Mexico.

Hospital acquisitions are growing across the country, and that’s leading to higher prices for patients. Many of those deals involve private equity, which often makes cuts to certain care to drive up profits, or religious organizations that might refuse types of care that they don’t support.

New Mexico is at an especially high risk for deals that could limit health care. It also has a new law that could curb that.

Last year, the only hospital in Otero County, Gerald Champion Regional Medical Center, signed a merger agreement with a Catholic nonprofit with very little local input. The county also contains the Holloman Air Force Base and the Mescalero Apache Reservation.

Bold Futures New Mexico Religious Refusals Coordinator Kat Sánchez said that deal cut back residents’ health care options, especially for care that the Catholic Church doesn’t support.

“We've heard from folks that they had already started canceling vasectomies that were scheduled before the paperwork had even been signed for the merger to go through,” she said.

Advocacy groups like Bold Futures and the American Civil Liberties Union of New Mexico called for players in the deal to slow it down, outline what the impact would be on residents and seek community input.

“One of the things that we heard was leaders saying very clearly that they had no voice in the acquisition that happened there,” Sánchez said.

Once the deal went through, she and her colleagues knew there wasn’t anything they could do to roll it back, but they saw it as a warning for what could happen to health care in other vulnerable New Mexico communities.

“Seemingly, the mergers and acquisitions are happening more often around the country and they're happening in rural areas,” she said.

New Mexico is particularly at risk. President of the New Mexico Hospital Association Troy Clark told legislators last year during a Legislative Finance Committee interim hearing that over two thirds of New Mexico hospitals had been in the red in the 12 months prior.

And it is not news to many New Mexicans that the state lacks health care providers. All but one of its 32 counties are facing a general shortage of health care professionals, according to the Rural Health Information Hub.

House Majority Whip Reena Szczepanski said she gets a lot of calls in particular about maternity care, which one third of New Mexico counties currently lack.

“We've had a number of hospitals around the state that have either ceased providing those services entirely or have gone to very limited hours. All of that has been of great concern to the community,” she said.

Szczepanski said New Mexico health care providers are strapped for cash.

“We’re, in some ways, a unique market for health care, if you look at it from an economic point of view, in that we have a lot of folks in our state covered by public programs, both Medicaid and Medicare,” she said.

Those programs tend to bring in less money than private insurers. Szczepanski says she has concerns that financial instability is attracting interest from potentially predatory groups, like private equity firms.

Earlier this year, a report also put New Mexico at the top of alist for private equity risk.

“That model is fundamentally at odds with a public good focus on health care,” said Chris Noble, policy director for the Private Equity Stakeholder Project, which issued the report. He said that when private equity in particular gets involved with health care, leadership focuses on making a quick profit for investors over improving the functions of the hospital.

Usually, they do that by cutting back staff, even if the staff is already struggling to keep up with the needs of patients. Or, they’ll cut corners or raise prices.

Noble said more state governments are taking notice of the impact that’s having on public health.

“You see a big proliferation of these laws in the last few years,” he said.

Most states require some notice of a transaction involving a health care organization, and many require an approval from the state. New Mexico is joining that group this year.

State Senator Katy Duhigg and Representative Reena Szczepanski co-authored the Health Care Consolidation Oversight Act, which gives the state a say in hospital mergers and acquisitions.

Senator Duhigg said the state’s lack of regulations in this area has made it vulnerable.

“It was ripe for the picking, and that made it a very attractive area for these companies to come into because they could basically do whatever they wanted,” she said.

The law says the leadership of organizations seeking to merge has to give notice to the superintendent of insurance. It also has to show that the transaction won’t lead to bad outcomes for patients, like higher prices or limited availability of services.

“This is really a monopoly issue,” Duhigg said. “This is an antitrust issue, and we don't have great antitrust laws here in New Mexico.”

The law is only in effect until July 1, 2025. Duhigg said that is because she and her colleagues are working on a more comprehensive one with more community input and ideas from other states with the goal of getting it through next year’s longer, two-month legislative session. She said the current law isn’t enough.

“It really doesn't have teeth. It has no enforcement mechanism. It has no transparency,” she said.

But for now, Duhigg said this gives the state a way to keep track of transactions and where they might be harming the state’s health care, which it didn’t have before.

This coverage is made possible by the W.K. Kellogg Foundation and KUNM listeners. 

Megan Myscofski was a reporter with KUNM's Poverty and Public Health Project.
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