Recent FTC Administrative Decisions and Comments Indicate Shifting Landscape For Hospitals11.13.15
Last week, the Federal Trade Commission (FTC) filed an administrative complaint alleging the deal between two West Virginia hospitals, Cabell Huntington Hospital and St. Mary’s Medical Center, would lead to a “near monopoly” and could result in “higher prices and lower quality of care.”
The FTC said it would go to federal court for a preliminary injunction to stop Cabell from acquiring crosstown rival St. Mary's if the Catholic Church and state officials allow the deal.
In recent years, the FTC has been successful in persuading federal judges to accept its definitions of markets and rejecting providers' arguments that they are consolidating in order to meet the demands of the Affordable Care Act and to provide more efficient and higher-quality care.
The West Virginia news comes as Mountain States Health Alliance (MSHA) and Wellmont Health System (two hospital systems with a presence in Tennessee and Virginia) continue to move forward with their proposed merger, which still requires several approvals. Their hope is that process, which includes the filing of a Certificate of Public Advantage (COPA) with both Tennessee and Virginia, will eliminate the need for the FTC to get involved.
In September, the FTC’s Office of Policy Planning, Bureau of Competition and Bureau of Economics offered FTC staff assistance to the Tennessee and Virginia health departments during their reviews of any COPAs. The programs at issue describe a process by which certain providers may be granted antitrust immunity in connection with transactions which might otherwise run afoul of the antitrust laws. The FTC noted that its comments are intended to help ensure that any decision regarding the potential benefits and disadvantages of a proposal are based on a rigorous competitive analysis. The comments also reiterated the FTC’s longstanding position that legislation intended to grant antitrust immunity is likely to harm healthcare consumers.
The submitted comments note that the Tennessee and Virginia Departments of Health are authorized to approve COPAs, if it is determined that the likely benefits of the agreement outweigh the likely disadvantages from a reduction in competition. The rules state that the Tennessee Attorney General’s Office and the Virginia Commissioner of the Department of Health may consult with the FTC when reviewing an application. Each state’s rule lists potential benefits and disadvantages, many of which, the FTC noted, are factors which the FTC would assess when evaluating mergers. The FTC staff indicated its willingness to provide any expertise and information that it is authorized to share in connection with review of COPA applications, and asked the state departments to incorporate concepts of permissible sharing of information and expertise between the state departments and the FTC in the promulgated rules.
MSHA and Wellmont will formally file their COPAs sometime in December. Later this month, they’ll file a pre-submission report which will provide a clearer picture to the public about what is being proposed. Although at this point, the states are in charge of regulating the merger there is still the possibility the FTC could get involved formally. The FTC’s willingness to get involved in state rulemaking may be a sign of future challenges to state action immunity in healthcare transactions.