On October 21, 2019, the Federal Trade Commission (FTC) announced that it had issued orders to five health insurance companies and two health systems to provide information that will allow the agency to study the effects of certificates of public advantage (COPAs) on price, quality, access, and innovation of healthcare services. The ultimate goal of the study is to enhance the FTC’s knowledge of COPAs in order to inform the agency’s advocacy and enforcement efforts, and to serve as a resource for states considering COPAs.
A COPA is a written certificate typically issued by a state department of health under state law and regulations that seek to displace federal (and sometimes state) antitrust laws, and thereby provide immunity from antitrust law to certain healthcare-provider mergers, acquisitions, and other affiliations. Under the “state action doctrine,” states may shield certain transaction and conduct from federal antitrust law if the state (1) has affirmatively expressed and clearly articulated an intent to displace federal antitrust law and replace it with state regulation, and (2) actively supervises the transaction or collaboration.
Concerned that federal antitrust law and FTC enforcement against healthcare mergers has been too stringent and prevents procompetitive transactions, several states have passed COPA (or “cooperative agreement”) laws to permit healthcare providers to enter into transactions that might otherwise be blocked by the FTC. Proponents of COPAs believe that they allow healthcare providers to enter into transactions that eliminate costly duplicative services, achieve clinical efficiencies, facilitate more integrated care, and enable other community health benefits.
Recently, the FTC’s attempts to stop two hospital mergers—the combination of Cabell Huntington Hospital and St. Mary’s Medical Center in West Virginia, and the Mountain States Health Alliance and Wellmont Health System transaction spanning Tennessee and Virginia—were stymied by COPA laws. In the Cabell merger, the FTC dropped its lawsuit challenging the merger after the state passed a cooperative agreement law and the West Virginia Health Care Authority approved the cooperative agreement. In the Mountain States/Wellmont merger, the FTC vigorously opposed the grant of a COPA in Tennessee and a cooperative agreement in Virginia through the respective state COPA processes, but both states approved the COPAs.
Following the COPA approvals for these two transactions, the FTC announced in November 2017 the COPA Assessment Project, seeking empirical research and public comments regarding the impact of COPAs on prices, quality, access, and innovation for healthcare services, and regarding the benefits or harms that have resulted from COPAs. In June 2019, the FTC hosted a public workshop as follow up to the request for comment. The tone of that workshop was largely critical of COPAs, with FTC Chairman Joseph Simons stating that “COPAs have prevented the FTC from challenging problematic deals” and that he remained skeptical of COPA’s purported benefits, given the insufficient data on their effects.
By issuing the October 21 order for information to the five health plans, Ballad Health (the merged Mountain States/Wellmont system), and the merged Cabell/St. Mary’s system, the FTC intends to (1) further its understanding of the effects of COPAs on price, quality, access, and innovation of healthcare services, (2) study the effects of hospital consolidation on employee wages, and (3) retrospectively study the effects of the Mountain States/Wellmont and Cabell/St. Mary’s transactions in particular. In fact, the FTC announcement indicates that the agency’s study is a long-range endeavor, as it intends to collect information “over the next several years” about the Ballad and Cabell COPAs.