- The Federal Trade Commission sent a letter to Texas regulators urging they deny Hendrick Health System's request to acquire its only other competitor in rural West Texas.
- The deal would normally never clear antitrust hurdles, but state lawmakers ushered in a law last year that immunizes such deals from federal oversight in exchange for state oversight, including rate review.
- FTC was blistering in its comments about the potential tie-up, warning regulators it would result in serious competitive and consumer harm in the form of higher prices, lower quality and diminished access to care and innovation — plus depressed wage growth for nurses. Rate review would not mitigate the harms this acquisition would inflict, FTC argued in the letter dated Friday.
The FTC has taken aim at COPAs — certificates of public advantage — that eschew federal intervention in recent years as states have turned to them to seemingly address some unmet healthcare need or the threat of closures, particularly in rural communities.
Behind these COPAs is the belief that allowing otherwise anticompetitive deals to proceed is worth it to avoid those pitfalls.
However, FTC is staunchly opposed to such arrangements that shield these deals from its oversight, noting that restoring lost competition is extremely difficult. Tennessee, West Virginia and Virginia recently passed similar laws.
In April, CHS announced its plans to sell Abilene Regional Medical Center, a 231-bed facility, to Hendrick Health System, along with 188-bed Brownwood Regional Medical Center (though Brownwood does not raise similar antitrust concerns, FTC noted).
As the Texas Health and Human Services Commission weighs the proposed transaction, the FTC has argued that Hendrick Health System and Abilene Regional Medical Center are close competitors and a combination would result in "extraordinarily" high market shares. In fact, the combined market share of 85% of all inpatient services exceeds those of past hospital mergers that the FTC challenged and a federal court ultimately blocked.
The federal agency pointed to Penn State Hershey Medical Center's failed acquisition of PinnacleHealth System in 2016, which would have resulted in a combined market share of 76%, and Advocate Health's failed tie-up with NorthShore University HealthSystem, which would have generated a 60% market share.
Even still, prolonged state oversight is difficult to maintain as administrations change and lawmakers come and go.
Federal regulators warned that restoring lost competition is extremely difficult and "often impossible."
For example, North Carolina created a COPA more than 20 years ago for the system that would become Mission Health in Asheville. In 2015, the state rescinded the COPA, and with it, the oversight of Mission Health. HCA, one of the nation's largest for-profit hospital chains, purchased Mission for $1.5 billion in 2019.
Last year, the FTC launched an investigation into COPAs, seeking to examine the long-term effects on healthcare prices, quality and access to services.