Antitrust Battle Against COPA Laws
In an effort to prevent anticompetitive behavior in the American healthcare marketplace, the Federal Trade Commission (FTC) has recently turned its attention to the rise in hospital mergers facilitated through the use of Certificate of Public Advantage (COPA) laws.
COPAs allow state agencies to approve proposed mergers among healthcare facilities following a satisfactory determination that the advantages of the merger outweigh the anticompetitive effects of consolidation in the healthcare marketplace.[1] Typically, the state departments of health are charged with supervising and regulating mergers exercised under COPAs.[2]
The FTC asserts that COPAs function as a mechanism to shield hospital mergers from scrutiny under state and federal antitrust laws subject to state action doctrine.[3] The FTC argues that hospital mergers granted pursuant to COPAs are destined to cause adverse effects in the marketplace, such as higher prices for patients seeking medical care, a decline in the quality of care rendered, and a reduced level of access to various medical services.[4]
It appears that the FTC is concerned that these mergers will eventually result in a heavily consolidated hospital market under the control of a single health system. Studies on the effects of these mergers released by the FTC shows a general increase in commercial inpatient prices by a minimum of 20%.[5] The FTC is also concerned that these mergers pursued under the gloss of COPAs fail to boost wages for hospital employees due to a reduced supply in employment opportunities.[6]
Hospital executives that advocate for mergers through use of COPAs often cite cost savings and efficiencies that could improve patient outcomes following consolidation.[7] Hospital systems nationwide have faced significant financial pressures stemming from rising costs for labor, drugs, and medical supplies in the years following the disturbance caused by the COVID-19 pandemic.[8]
Recently, on September 5, 2024, the FTC has challenged Indiana’s first proposed merger under the state’s COPA, enacted in 2021, referencing the same arguments mentioned above.[9] The FTC has urged the Indiana Department of Health and state lawmakers to oppose the consolidation of Union Hospital and Terre Haute Regional Hospital.[10]
Both hospitals are in Vigo County, located near Indiana’s western border. According to the Indiana Department of Health’s county health scorecard, Vigo County experiences serious public health challenges, particularly ranking in the bottom third among Indiana counties for life expectancy and bottom half for adult obesity.[11] To solve these challenges, Union Health and Terre Haute believe this partnership will enhance patients’ access to quality medical care, create synergies of medical expertise between healthcare providers at both hospitals, and lower costs.[12] The FTC has submitted a comment to the Indiana Department of Health generally objecting to the proposed merger in an effort to dissuade the agency from approving the same.[13]
COPAs exist in Florida but are commonly invoked for rural hospital system mergers and related cooperative agreements. Specifically, Florida Statute Section 381.04065 states the consolidation of hospital networks or technologies between members of rural health networks do not violate state or federal antitrust laws when such arrangements improve the quality of health care and moderate cost increases.[14] The Florida Department of Health is charged with the duty of approving and supervising rural hospital networks that seek to merge under this statute.[15] The state legislature views this policy as a proper means “to facilitate the provision of quality, cost-efficient medical care to rural patients.”[16]
Conclusion
Hospital mergers will continue to be a prevalent option for providers seeking to deliver care more efficiently and maintain healthy operating margins. Indeed, such mergers will see an uptick as financial challenges continue to mount for hospitals. As such, the FTC will be keen on limiting the scope of these proposed mergers under COPAs to achieve its mission of protecting American consumers from anticompetitive business practices that disrupt the healthcare industry.
[1] Federal Trade Commission, COPA Policy Paper, (August 15, 2022), https://www.ftc.gov/system/files/ftc_gov/pdf/COPA_Policy_Paper.pdf.
[2] Id.
[3] Federal Trade Commission, Certificates of Public Advantage (COPAS), https://www.ftc.gov/news-events/features/certificates-public-advantage-copas (last accessed September 13, 2024).
[4] Id.
[5] COPA Policy Paper, at 3.
[6] Id.
[7] Id.
[8] American Hospital Association, New AHA Report Finds Financial Challenges Mount for Hospitals & Health Systems Putting Access to Care at Risk, (April 20, 2023), https://www.aha.org/press-releases/2023-04-20-new-aha-report-finds-financial-challenges-mount-hospitals-health-systems-putting-access-care-risk.
[9] Rebecca Pifer, FTC Opposes Indiana’s First Hospital Merger Under Controversial COPA Law, Healthcare Dive, (September 6, 2024), https://www.healthcaredive.com/news/ftc-opposes-indiana-hospital-copa-union-terre-haute-merger/726253/.
[10] Id.
[11] Health First Indiana, County Health Scorecard, https://www.in.gov/healthfirstindiana/county-health-scorecard/ (last updated June 4, 2024).
[12] Union Health, Union Health and Terre Haute Regional Hospital Merger, https://union.health/upload/docs/UnionHealth/merger/UnionHealthTerreHauteRegionalMergerFAQ.pdf (last accessed September 13, 2024).
[13] Federal Trade Commission, Federal Trade Commission Staff Submission to Indiana Health Department Regarding the Certificate of Public Advantage Application of Union Health and Terre Haute Regional Hospital, (September 5, 2024), https://www.ftc.gov/system/files/ftc_gov/pdf/in_copa_comment_9-5-24_public_redacted.pdf.
[14] Fla. Stat. § 381.04065.
[15] Id.
[16] Id.
*****************************************************
It should be noted that I am not your lawyer (unless you have presently retained my services through a retainer agreement). This post is not intended as legal advice, it is purely educational and informational, and no attorney-client relationship shall result after reading it. Please consult your own attorney for legal advice. If you do not have one and would like to retain my legal services, please contact me using the contact information listed above.
All information and references made to laws, rules, regulations, and advisory opinions were accurate based on the law as it existed at this time, but laws are constantly evolving. Please contact me to be sure that the law which will govern your business is current. Thank you.