FTC Policy Paper Opposes COPAs

The Federal Trade Commission’s (“FTC”) competition mandate goes beyond enforcing antitrust laws. It has the authority to study competition law and policy issues, issue reports, and advise state, local and foreign governments on the social benefits of private market competition. As this advisory body, the FTC has often stepped in when state governments consider proposals to limit competition among health care providers. In particular, some states have enacted Certificate of Public Advantage (also known as “COPA”) laws. This is a state-specific regulatory system aimed at replacing competition with regulatory oversight. State laws that recognize hospital exclusivity protect hospitals from federal antitrust litigation through state judicial doctrines created by the judiciary. This principle states that anticompetitive activity is subject to federal antitrust laws if states articulate a policy of replacing competition with regulation and actively oversee the resulting monopolies to ensure that they meet the state’s regulatory objectives. It claims to be outside the scope of the law.

Earlier this week, the FTC issued a policy paper highlighting what it sees as the pitfalls of using COPA in an effort to persuade state regulators not to use it. Typically, the state’s COPA regulations require the merging parties to demonstrate that the potential benefits of the proposed transaction outweigh any potential harm from loss of competition. However, according to the FTC paper, COPA typically results in a monopoly for a single hospital, often with adverse effects on patient costs, patient care, and wages for healthcare workers. The FTC opposes using COPA to protect what it considers to be illegal hospital mergers without COPA, and urges state legislators to urge him to avoid enacting COPA and repeal existing mergers. I am demanding it. This paper is the culmination of a policy project published by the FTC in 2017 to assess the impact of his COPA on price, quality, access and innovation in healthcare services. This project included a review of his past COPAs, public workshops focused on practical experience with COPAs, and ongoing research on recently approved COPAs.

The FTC paper found that some COPA-covered hospital mergers, despite regulatory commitments designed to reduce anti-competitive impacts, have resulted in higher prices, lower quality of care, and a It summarizes research showing that it has resulted in slower wage growth for healthcare workers. According to the paper, hospitals will seek COPA if the proposed merger violates antitrust laws. The COPA Act was enacted to replace competition among health care providers with regulatory oversight by state agencies. States often impose price controls, rate controls, and other conditions on COPA recipients to mitigate damage from lost competition, but such mitigations don’t work, according to the FTC.

According to the FTC paper, hospitals’ arguments in favor of COPA-covered mergers are flawed. Hospitals generally argue that the proposed merger will result in cost savings and efficiencies, allowing for improved clinical quality. However, the paper argues that hospital mergers do not lead to great efficiencies. Hospitals seeking COPA also cite improving their financial situation to better manage low reimbursement rates resulting from healthcare reform. However, the paper argues that hospitals seeking COPA have sufficient financial resources to operate independently. The hospital also argues that the proposed merger will create jobs and ensure local access to health care. hospitals’ cost-cutting projections, which assume a reduction in

FTC documents show that 10 COPA certificates have been issued. Seven of these cases involved a merger between two general emergency hospitals serving the area. COPA laws have been enacted and utilized in nine states: Minnesota, North Carolina, Montana, South Caroline, Maine, West Virginia, Tennessee, Virginia, and Texas. Indiana has passed the COPA Act in 2021, but it has not yet taken effect. Two hospitals in upstate New York recently indicated their intent to seek COPA for their proposed merger.

The FTC document considers several case studies of COPA certification grants to support the FTC’s position against the use of COPA.

• Mission Health System (North Carolina – 1995). Memorial Mission Hospital and St. Joseph’s Hospital are the only general emergency hospitals in Asheville, North Carolina, and joined together in 1995 under the state’s COPA law. In 1998, the hospitals were merged with state approval, subject to certain conditions regarding margins, costs, physician hiring limits, and quality and contractual commitments. COPA was retired in 2016. Empirical studies show that between 1996 and 2008, Mission Health raised prices at least 20% more than comparable hospitals. Another study found that average prices rose 25% by 2015, and another 38% after COPA was repealed.

• Benefis Health System (Montana – 1996). The Benefis Health System was established in 1996 pursuant to COPA, which allowed the merger of two general emergency hospitals in Great Falls, Montana: Columbus Hospital and Montana Deaconess Medical Center. COPA included terms on revenue caps, quality initiatives, and other cost-reduction initiatives. In 2007, the state legislature passed a bill ending his COPA. Empirical studies have shown that Benefis prices closely tracked peer hospital prices in the duopoly market during COPA, but increased by at least 20% after COPA ended.

• Palmetto Health System (South Carolina – 1997). Two general emergency hospitals in Columbia, South Carolina, Baptist Healthcare System and Richland Memorial Hospital merged under COPA to create Palmetto. During his first five years at COPA, Palmetto was responsible for managing and committing to fees and revenues to achieve cost savings and provide a portion of the proceeds to fund public health initiatives and community outreach programs. was the subject of Empirical studies found that palmetto prices were no higher than comparable hospitals when subject to COPA conditions. (The paper notes that this may be a result of conditions or because hospital competition remains in the market.)

• MaineHealth (Maine – 2009). In 2009, pursuant to COPA, MaineHealth acquired Southern Maine Medical Center, located 20 miles from MaineHealth’s flagship hospital in Portland, Maine. This combination resulted in an overwhelming share of discharged patients in the Southern Maine service area. COPA required MaineHealth to limit Southern Maine’s operating margins, cut costs, expand access and maintain quality, but not impose conditions on his other MaineHealth hospitals was. COPA expired in 2015. An empirical study found that southern Maine price increases were not statistically significant compared to peers during COPA. But after COPA expired, Southern Maine prices went up nearly 50% and quality went down. Also, prices at MaineHealth’s flagship hospitals, which were not subject to COPA terms, increased 38% during COPA and then increased 62%.

• Ballad Health System (Tennessee/Virginia – 2018). The Mountain States Health Alliance and Wellmont Health System, interstate competitors, merged to form Ballad under COPA in Tennessee and Virginia. Both COPAs imposed price caps, quality-of-care commitments, and prohibitions on certain contract clauses. Some of the terms have changed and we are concerned about certain changes that may allow Ballad to challenge applications for required certificates by other providers seeking to enter the market. The FTC said in 2019 that he will study the impact of COPA on price, quality, access and innovation.

• Cavell Huntington Hospital (West Virginia – 2018). Cavell Huntington Hospital and St. Mary’s Medical Center, both located in Huntington, West Virginia, merged in 2018 under COPA approval. Conditions included annual reporting, review of regulatory rates, prohibition of certain contractual practices, commitment to quality of care and population health, and maintaining St. Mary’s as an independent general emergency hospital for a minimum of seven years. I was. COPA is scheduled to expire in 2024. The FTC also announced that it will investigate the impact of this COPA on price, quality, access and innovation.

• Hendrick Health System/Shannon Health System (Texas – 2020). Hendrick Health System and Shannon Health System have received COPA approval for their respective mergers. COPA terms include a review of regulated fees and reporting requirements. The FTC has said it will continue to monitor the impact of COPA.

The paper concludes that COPA rarely works as promised. In particular, COPA will exacerbate widespread problems of hospital consolidation, resulting in lower wage growth for hospital employees, difficulty in monitoring compliance with COPA terms, susceptibility to regulatory circumvention, and temporary is.

The vote to publish the staff report was 5 to 0. This underscores the continuing decades-old consensus among federal antitrust enforcers that health care provider integration is a key priority. Much of the news coming out of the FTC over the past year has focused on divisions among commissioners on policy priorities, but health care remains an area of ​​consensus, especially when it comes to hospital mergers. that’s right.