During this past legislative session, the Minnesota Legislature passed H.F. 402. Broadly speaking, this legislation does three things:
First, it creates a new process and criteria by which the MN Attorney General (AG) and the MN Department of Health (MDH) must use when reviewing most proposed healthcare mergers or other healthcare financial transactions in the state through a new patient-focused and worker-informed method for reviewing the merits of all proposals.
Secondly, it prohibits any out-of-state entity from owning and controlling the UMN educational hospitals in the system.
Lastly, it extends the prohibition on health maintenance organizations’ (HMOs) insurance plans converting from nonprofit to for-profit entities through July 2026.
New Regulations on Healthcare Mergers and Other Transactions
Under this new law, most proposed healthcare transactions or mergers will be subject to new rules and regulations before a proposal can be approved. The overarching parameters governing whether a proposed transaction must go through these new steps include:
- If at least 40% of the assets of at least one healthcare organization involved in a proposed transaction would be transferred to a new or different existing entity;
- The entities involved in a transaction will be subjected to increased reporting if the assets total between $20 and $79.9M;
- Transactions over $80M will be subjected to increased regulations outlined in the law.
- For transactions over $80M, which is most mergers, entities will be subject to the following:
- Entities must provide notice to AG and MDH at least 60 days prior to a proposed closing date on a transaction. AG may extend the notice/review period for an additional 90 days.
- All entities must provide data detailing the proposal, including items like conflicts of interest, financial records, all terms and conditions of the transaction, any plans or potential for reducing workforce or services, financial and economic analysis, and other organizational records from a period of at least three years previous
- Any transaction that will “substantially lessen competition” or “tend to create a monopoly or monopsony” is explicitly prohibited.
- Increased transparency related to the transfer of public benefits and/or charitable assets.
- Any officer, director, trustee, or other executive of a nonprofit healthcare entity is explicitly prohibited from directly or indirectly benefitting off a transaction/merger.
- AG may bring an action in district court to protect the public interest. These “public interest” factors include: harms to public health, reduced access or affordability of care, negative impacts to competing providers, reduced delivery of healthcare to disadvantaged populations, negative impact on medical education and the healthcare workforce, increased patient costs and spending, negative impacts to wages or number of workers employed by an entity, and whether or not the transaction would have a negative impact on existing or future collective bargaining units/agreements.
- AG has the legal authority to directly prevent mergers from moving forward that would create a monopoly or monopsony, which might include the proposed Sanford-Fairview merger, but it would take action in district court to reverse or otherwise significantly alter a proposed transaction.
Ownership or Control of UMN Healthcare Facilities
In addition to the new regulations surrounding healthcare transactions, H.F. 402 also put language into statute, that explicitly recognizes the importance of UMN healthcare facilities to the State of Minnesota’s medical education, research, and related public service, as well as the need to ensure that UMN healthcare facilities and related charitable assets remain always remain with UMN, a land grant institution. The language explicitly prohibits UMN healthcare facilities from being “owned or controlled, directly or indirectly, in whole or in part, by a for-profit entity or an out-of-state entity” unless the AG determines that such an arrangement would be in the public’s best interest. It also clarifies exactly which facilities are being considered “UMN healthcare facilities”:
- M Health Fairview University (West Bank), located at 2450 Riverside Ave., Minneapolis;
- Masonic Children’s Hospital, located at 2450 Riverside Ave., Minneapolis;
- University of Minnesota Medical Center (East Bank), located at 500 Harvard St., Minneapolis.
HMO Conversions
H.F. 402 also extended the moratorium on HMO plans converting from nonprofit to for-profit entities through July 1, 2026 (it was set to expire July 1, 2023). It also requires MDH to conduct a study into HMOs and HMO conversion, and to outline recommendations for dealing with this issue – as well as other similar issues related to charity care, the transfer of healthcare assets, and other healthcare antitrust problems.
What does this mean for nurses?
All in all, the passage of H.F. 402 created by far the most patient-focused, public-focused healthcare merger regulations of any state in the nation. This new framework will protect patients, nurses, and the entire healthcare delivery system from future profit-driven mergers that have been one of the leading causes of increased costs and decreased access to care.
Thanks to this law, the AG must significantly weigh the impacts to existing workers when reviewing a merger, including their collective bargaining agreements, which should help prevent bad actors from leveraging a merger to do union-busting if the employer entity is changing.
Although questions remain now that this law has passed, it is our belief that if Sanford and Fairview wish to move forward with their proposed merger that the two parties will need to provide a new 60-day notice (prior to their desired closing date) to the AG and MDH. Some of the remaining unknowns here include:
- If the Sanford-Fairview merger would be deemed a monopoly/monopsony (prohibited);
- If Sanford will remain interested in pursuing the merger after the passage of this new law;
- Whether or not the AG will extend the review period by 90 days;
- How long it would take district courts to make a determination, should it go to the courts;
- If the UMN hospitals can be separated from the rest of the system in the proposed merger;
- What happens to the Fairview system/hospitals if the merger is stopped.