Fair Play: Hospitals Outmaneuver the FTC, With States’ Help


Antitrust deciphered.


The Federal Trade Commission has been thwarted again by a tool increasingly used by states to bypass federal competition oversight. Virginia last week approved a local hospital merger, following a signoff from Tennessee. The FTC opposed the deal, but it’s barred from intervening on competition grounds.

The FTC is hamstrung by a federal doctrine that allows states to take certain actions without running afoul of federal antitrust statutes. In health care, several states have used this exemption and passed “certificate of public advantage” (COPA) laws that allow them to approve health care transactions that may have anticompetitive effects if the state says the benefits outweigh the harms. States often point to benefits of health care mergers like giving rural patients better care. They say those improvements outrank economic data that shows a big new provider would wield too much market power.

Virginia and Tennessee weren’t convinced by carefully drawn FTC warnings that the merger of Wellmont and Mountain States hospitals, whose patient base covers both states, would be disastrous for the community. FTC officials said the combination would lead to higher health care costs while quality, innovation, and access to care would suffer.

These COPA state laws have long been a thorn in the agency’s side. The federal government as a rule doesn’t like to be told what it can or can’t do. FTC staff argue that COPAs and other state antitrust exemptions for health care providers are harmful because they preserve the behavior most likely to hurt patients and insurers in the future.

But Tennessee and Virginia saw the merger as an opportunity to fulfill the problems plaguing their regional providers now, like outdated equipment and facilities and a scarcity of medical services.

The federal government has found itself in this place before, and it’s bound to see similar situations again. COPAs are resurging since their introduction in the 1990s. Three of the seven COPAs granted for hospital mergers occurred in the last two years. State legislators also are nimble enough to draft COPAs quickly to protect the mergers they want to see happen. That was the case in West Virginia two years ago when the state legislature rushed to pass a COPA law that forced the FTC to back off from its pending lawsuit against a hospital merger.

States may not always be impartial judges of proposed mergers. In rural states like West Virginia, hospitals are often the largest employer in a state and employ considerable political clout.

The FTC declined to comment on the Wellmont and Mountain States merger after Virginia signed off and the deal effectively sealed. But few days later, the agency issued a public request for input from academics and other experts on how COPA laws affect prices, quality, access, and innovation for health care services. A summit hosted by the agency will be held a year from now to discuss the evaluations.

A year is a long time to wait. Until the FTC can convince states the federal government knows best when it comes to health care mergers, the agency is likely to continue to be trounced by hospitals with a home-team advantage in convincing local authorities to take their side.

What’s Happening

On Tuesday, the American Antitrust Institute hosts its annual private enforcement conference. Sen. Amy Klobuchar (D-Minn.) will deliver the keynote.

Deputy Assistant Attorney General Andrew Finch will participate on a panel to discuss standard setting, intellectual property, and competition policy on Tuesday at the National Press Club.

The FTC’s Economic Liberty Task Force on Tuesday will host its latest roundtable to examine the effects of occupational licensure.

Food and Drug Administrator Scott Gottlieb, along with acting FTC Chairman Maureen Ohlhausen, will deliver keynotes at the agency’s Competition in Prescription Drug Markets workshop on Wednesday.

Sen. Al Franken (D-Minn.) will deliver a keynote speech an Open Markets Institute event on big tech companies on Wednesday.

Global Competition Review hosts a “Women in Antitrust” conference on Thursday. Ohlhausen is among the speakers.

Quote of the Week

“Ultimately, I am open to the idea of amending the antitrust laws, if necessary, to account for the characteristics of the internet,” said House Judiciary Committee Chairman Bob Goodlatte (R-Va.) at a Nov. 1 hearing on the role of antitrust in net neutrality.

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