Antitrust regulators are warning Tennessee not to terminate an agreement giving its health department oversight of Ballad Health, a hospital monopoly in the state.
The Tennessee legislature is considering bills that would allow Ballad’s certificate of public advantage, or COPA, to expire in 2028. Balled was formed in 2018 under the COPA, a controversial mechanism that allows potentially anticompetitive hospital mergers to go through in exchange for increased state oversight for a period of time.
Without the COPA, all state supervision of Ballad’s care quality, availability and access, along with population health initiatives, would end.
That could have steep consequences for Tennessee patients, including higher healthcare costs and poorer quality of care, the Federal Trade Commission said in the letter sent Wednesday.
The Tennessee legislature is currently considering two bills — House Bill 2278 and Senate Bill 2414 — that would allow Ballad’s COPA to expire in roughly two years. At that time, all Tennessee Department of Health oversight of Ballad would stop, except for restrictions on price increases, which would remain in effect until 2033 or until a competing acute care hospital opens in Ballad’s service area.
Lawmakers in the state argue repealing the COPA is a step toward establishing healthy hospital competition in Northeast Tennessee. Without the COPA, Ballad will once again be subject to state and federal monopoly laws, State Sen. Rusty Crowe told News Channel 9 in late March, and if the system violates antitrust standards it could face enforcement.
But it’s a little too late for that, as future antitrust actions can’t undo the anticompetitive merger that created Ballad in the first place, FTC officials implied in their letter.
“Repealing a COPA law or allowing a specific COPA to expire in the absence of competing healthcare systems enables a monopolist to exercise substantial market power unconstrained by state regulatory oversight or antitrust enforcement against merger-related harms,” the directors of the FTC’s Office of Policy Planning and Bureaus of Competition and Economics wrote in the letter sent to to Tennessee Rep. David Hawk.
“In many ways, this scenario is the worst possible outcome for patients: the hospital evades antitrust scrutiny on the front end by virtue of the COPA, and then evades scrutiny by the state governments on the back end by virtue of the COPA’s expiration,” they added.
In a statement, a spokesperson for Ballad said that the system advocates for better care access for its patients, and that decisions about its oversight should be left up to the state.
“Since the legislature originally created the COPA law, it is appropriate for the legislature to determine the policy going forward,” they said over email. “Regardless of the COPA, the oversight of anti-trust in Tennessee lies with the Attorney General, who acts independently. As it has for the duration of the COPA, Ballad Health will continue to comply with state and federal anti-trust law and would expect swift and serious action by the Attorney General if it were to violate such law.”
The letter continues the FTC’s long campaign against COPAs, which has stretched across multiple administrations. Sixteen states, mostly looking to prevent rural hospitals from closing, have COPA laws, according to Georgetown’s Center on Health Insurance Reforms.
But the agreements drive higher costs for healthcare services, lower quality of care, poorer patient health outcomes and more limited access to care, the FTC argues. Data about hospital performance and pricing is worrying when COPAs are in place. But the larger concern is about what happens when the agreement expires, leaving a geographic region with a largely unsupervised hospital monopoly free to do as it likes, experts say.
For example, Mission Health in North Carolina jacked commercial inpatient prices up about 25% when its COPA was in place, and then at least 38% after the COPA was repealed, according to the FTC.
As for Ballad, the system saw its wait times for patients in the emergency room more than triple since it was formed, according to KFF Health News. The Tennessee official responsible for monitoring the COPA said the state’s grading system allowed Ballad to continue operating under the COPA even though it continually failed to meet quality of care standards.
The FTC has long been a thorn in the side of Ballad, which was formed by a merger between Mountain States Health Alliance and Wellmont Health System in 2018. The agency issued comments and provided testimony against the merger. Still, Ballad’s COPA was approved, creating an operator with monopolistic power in northeast Tennessee and southwest Virginia.
The FTC’s letter also commented on bills that would remove Tennessee’s Certificate of Need requirements for acute-care hospitals to streamline the opening of new facilities.
Under CON laws, providers typically have to get the green light from a state before expanding, building new facilities, establishing new services or making certain large capital expenditures. Proponents of the laws argue they prevent unnecessary duplication of services, while critics say they prevent healthcare competition by making it harder for incumbent providers to enter markets.
Tennessee is considering removing the state’s CON requirements for acute care hospitals beginning in July 2028, though some parties want to push back the effective date until July 2030.
The FTC said it approved removing the CON restrictions, noting that potential opening of new inpatient acute care hospital would be a step towards building up hospital competition that was lost in Northeast Tennessee due to the formation of Ballad Health.
But the timing of the bills isn’t ideal, according to the FTC’s letter. If the CON isn’t axed until 2030, that would create two years in which Ballad could take anticompetitive actions unchecked by the state or competitors in its market.
FTC urged the Tennessee legislature to consider repealing the CON laws as soon as possible. The two year gap that would result from the current language is something lawmakers are trying to eliminate, according to local reports.
