Hospital Merger Opposed by FTC Moves Forward

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By Liz Crampton

Virginia’s Department of Health Oct. 30 approved a merger of local hospitals opposed by the Federal Trade Commission, the latest health care deal protected from federal intervention.

Mountain States Health Alliance and Wellmont Health System, located on the border of Virginia and Tennessee, needed approvals from both state regulators for their merger. The Tennessee Department of Health signed off on the deal in September. Now the new health system, named Ballad Health, is immunized from federal antitrust action under state law.

The providers have been working for two years to convince state regulators that their merger will benefit patients, particularly ones in rural communities. But the FTC disagreed. An agency official testified last year that the merger would increase hospital prices and decrease the quality of care for patients. The FTC declined to comment on the Oct. 30 approval.

This conflict between federal and state regulators about the merger highlights a gray area of antitrust enforcement in the health care industry. Under state law, an approval for a merger of health providers can be granted if a state authority determines the benefits of a deal outweigh possible anticompetitive effects. This can occur regardless of whether the federal government thinks the transaction is anticompetitive.

In a letter to hospital CEOs, the Virginia Health Commissioner said “the benefits likely to result from the proposed cooperative agreement outweigh the disadvantages likely to result from a reduction in competition from the proposed cooperative agreement.” The commissioner noted that competition between Wellmont and Mountain states has “failed to provide meaningful, visible benefits” and “people in the region continue to struggle with access to primary and specialty care.”

The FTC generally opposes these types of laws because the agency believes they permit anticompetitive transactions that result in higher costs for patients. The agency encountered a similar roadblock a few years ago when it tried to stop a hospital merger in West Virginia.

After a lawsuit against the deal was filed in an in-house administrative court, the West Virginia state legislature passed a law allowing state authorities to monitor mergers that have the potential to reduce competition. As a result, the tie-up was protected from federal antitrust enforcement, and the agency was forced to drop its lawsuit.

To contact the reporter on this story: Liz Crampton in Washington at lcrampton@bna.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bna.com

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