- The Federal Trade Commission needs more resources to keep up with increasing merger activity in the healthcare industry, FTC commissioner Rebecca Kelly Slaughter said Tuesday.
- The exemption allowing nonprofit hospitals to escape FTC conduct investigations and the law exempting the insurance industry from federal oversight are also overdue for repeal, Slaughter said.
- Better public data would also aid the commission's mandate to protect consumers, she said.
The Democratic commissioner said it's time to repeal the nearly 75-year-old McCarran-Ferguson Act that exempts the insurance industry from federal oversight.
"I'm all for getting rid of it," Slaughter said at an event from the left-leaning Center for American Progress. "Limitations on what we can investigate and enforce are of little benefit."
Slaughter is one of five FTC commissioners, three of whom are Republicans, including the chairman.
Currently, only states have the power to regulate the insurance industry, including health insurers. And McCarran prohibits FTC from undertaking studies relating to the insurance industry unless Congress specifically invites it to do so.
McCarran doesn't apply to hospitals and doesn't prevent FTC and the Department of Justice from reviewing healthcare industry mergers, including those involving health insurers.
DOJ and FTC share authority to review mergers for anticompetitive effect but tend to divide reviews based on their areas of expertise. In general, FTC handles hospital mergers and DOJ handles mergers in the insurance industry like CVS-Aetna.
And with consolidation in the industry accelerating, the commission needs more resources, Slaughter said. Merger filing fees haven't kept up with inflation while FTC funding has declined in real terms, constraining the commission's resources, she said.
"Let's talk about merger activity versus our resources," she said. "A fundamental problem we have is that these things are moving in opposite directions."
FTC faces other challenges, she said, including limitations on pre-merger reporting, a legal shield for the conduct of nonprofit hospitals, high evidentiary burdens, the threatened loss of high-quality public data, and state laws and actions that inhibit enforcement.
On the reporting front, many relatively small transactions don't have to be reported to the FTC before the deals close, meaning the commission can only challenge the deals after they're consummated. Although the relative value of these transactions is small, cumulatively, they represent roughly $30-40 billion, she said, with a disproportionate number of these deals in the healthcare space.
"Challenging a merger after-the-fact can significantly delay relief, prolong anticompetitive harm in the form of higher prices or reduced quality and innovation, and make effective remedies more difficult to achieve," Slaughter said.
Legal exemptions also leave FTC without jurisdiction to police the conduct of nonprofit hospitals, which represent 45% of all U.S.hospitals. Once nonprofit hospitals merge, FTC is sidelined from redressing any subsequent anticompetitive practices, she said.
The FTC can investigate nonprofit hospital mergers, but nonprofits are not subject to general "conduct" investigations. For this reason, nonprofits typically get investigated by DOJ or the states.
State actions also can sometimes be an impediment to FTC enforcement, Slaughter said. Several states have passed laws and regulations permitting merging hospitals to enter into certificates of public advantage (COPAs) which shield them from antitrust scrutiny. Recently, COPAs hampered FTC's challenge of two hospital mergers, including one over which FTC had already sued to block, she said.
Tennessee, Virginia and West Virginia have all passed laws immunizing mergers from antitrust enforcement. The states essentially concluded that relying on competition alone wasn't enough to protect them from price increases or limited access to care in rural areas. The states shield the mergers from federal regulators in exchange for prolonged state oversight.