A report from the Federal Trade Commission is warning state lawmakers about the dangers of shielding hospital mergers from federal antitrust scrutiny in exchange for prolonged state oversight.
The report released on Monday compiles research that shows these arrangements, often called Certificates of Public Advantage, result in higher prices, lower quality of care and lower wage growth for employees.
Despite hospitals’ claims about the benefits of COPAs, “we are not aware of any proven benefits of COPAs,” FTC Director of Policy Planning Elizabeth Wilkins said in a statement. “We urge state lawmakers to consult local health insurers, employers, and workers regarding the potential impact of COPA legislation.”
COPAs rarely make good on their promises, the FTC said, and lawmakers should remain skeptical of these arrangements.
Over the years, multiple states have passed legislation allowing hospitals to merge, granting deals that otherwise would have been scuttled by antitrust regulators. The states agree to shield these deals from federal regulators in exchange for the prolonged state oversight.
However, in the paper the FTC warned that these COPA mechanisms are only temporary and are eventually undone. When that happens areas are then “left with a hospital monopoly that can exercise its market power without constraint,” the FTC said.
That scenario played out in North Carolina where researchers found price increases during and after a COPA ended.
Nearly three decades ago, North Carolina lawmakers passed a COPA allowing the only two competitors in Asheville — Mission Hospital and St. Joseph’s Hospital — to merge in exchange for state oversight of the merged hospital’s margin, cost, caps on physician employment and quality and contracting commitments.
North Carolina eventually repealed the COPA, resulting in an “unregulated monopoly,” Erin Fuse Brown, a law professor at Georgia State University, wrote in a 2019 paper.
For-profit hospital chain HCA Healthcare later purchased Mission Health for $1.5 billion. The merger occurred “despite the fact that the COPA was originally approved, in part, to prevent out-of-state for-profit healthcare systems from acquiring the local hospitals,” the FTC said.
The antitrust regulator pointed to the anticompetitive harms that occurred as a result of COPAs in other states, including Maine, Montana, South Carolina, Texas, Tennessee, West Virginia and Virginia.
Monitoring these deals to ensure they’re compliant requires experts and numerous resources, which can be difficult for states, especially as state budgets change, the FTC cautioned.
“FTC staff urges state lawmakers to avoid using COPAs to shield otherwise anticompetitive hospital mergers,” the paper said.