Virginia and Tennessee have both approved a proposed merger that allows two health systems, Mountain States Health Alliance and Wellmont Health System, to sidestep Federal Trade Commission (FTC) oversight.
- The merger would normally need FTC review, but the systems used a state process called a Certificate of Public Agreement (COPA) that allows them to bypass the FTC. Instead, the two states decide whether the merger is in the public’s interest.
The two companies, which have long been competitors fighting for market share in the Appalachian Mountains, will combine into Ballad Health. They said working as two separate systems is wasting money. Merging into one will lead to savings that the system could spend on improving public health services, according to the companies.
When Tennessee gave its OK, the state’s Department of Health said, “For the state to consider and act on the proposal for Mountain States and Wellmont to merge, the systems agreed through the legislative process to meet a clear and convincing standard that their merger would create a public benefit to the residents of Northeast Tennessee that would outweigh any downsides of a monopoly of services.”
Going the COPA route allows the merger to get state approval rather than needing FTC review. The FTC has increasingly grown interested in potential healthcare mergers.
Over the past year, the FTC helped reject a potential merger of Advocate Health Care and Northshore University Health System, which would have created the largest nonprofit health system in Illinois. The agency also got involved in other proposed mergers, including Sanford Health’s merger with Mid Dakota Clinic.
However, some states have implemented COPA laws and regulations that allow companies to avoid FTC oversight.
“The goal of such COPA laws generally is to reduce ‘unnecessary’ duplication of healthcare resources and control healthcare costs,” according to the FTC. “In recent years, providers have claimed that these cooperative agreements would provide efficiencies to enable them to participate in new healthcare delivery and payment models. COPA laws vary by state, but generally purport to immunize mergers and other conduct from antitrust laws if the state determines that the likely benefits of the COPA outweigh any disadvantages attributable to reduced competition.”
The FTC has raised concerns about whether the COPA regulations “achieve the state's intended policy goals.” On Nov. 1, the FTC issued a public notice “encouraging academic and industry research on the impact of Certificates of Public Advantage on prices, quality, access and innovation for healthcare services.” The FTC is also seeking public comment on the benefits and harms that resulted from those certificates or other state-based “regulatory approaches intended to control healthcare prices and improve quality.”
The federal agency said it needs the information to enhance FTC’s Office of Policy Planning, Bureau of Economics and Bureau of Competition’s understanding of COPAs.