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FTC Submits Public Comments to States Considering Regulations of Cooperative Agreements Between Hospitals

The Federal Trade Commission (FTC) recently submitted comments to Virginia and Tennessee regarding proposed laws in each state relating to Cooperative Agreements between hospitals and the granting of Certificates of Public Advantage (COPA). This continues the FTC’s active monitoring of state regulations potentially affecting competition in the health care market. In response to the states’ calls for public comments, the FTC reiterated its long-standing position that legislation purporting to grant antitrust immunity is unnecessary to encourage pro-competitive collaborations among health care providers.

The regulations under consideration in each state grant the state health departments authority to approve applications for consolidation of assets between hospitals by merger or other combination if the benefits of such Cooperative Agreement outweigh the disadvantages likely to result from a reduction of competition. The FTC highlighted in its comments that the factors to be considered by the health departments in weighing the potential benefits and harms from proposed Cooperative Agreements are already considered by the FTC when it reviews proposed hospital and health care provider mergers. The FTC asserted that it has significant expertise and experience in evaluating such mergers, and it has the ability to devote significant resources to fully investigate and analyze the potential competitive impact of such transactions.

In reiterating its position that legislation purporting to grant antitrust immunity is unnecessary, the FTC explained that the antitrust laws are consistent with the laudable public policy goals of the proposed state regulations, including improving quality, reducing costs, and improving patient access for health care services in rural communities. Following established antitrust jurisprudence and its own horizontal merger guidelines, the FTC considers and balances various market factors in reviewing proposed mergers—including proposed mergers of health care providers—such as: the merging parties’ overlapping services; market shares and market concentration levels; the closeness of competition between the merging parties; barriers to entry by other providers; economic analysis based on patient discharge and pricing data; efficiencies; and other potential merger benefits, such as cost savings or quality improvements. Antitrust immunity is unnecessary, the FTC argued, because if on balance these factors suggest a merger will result in procompetitive benefits rather than harm to competition, the transaction will pass muster under the antitrust laws.

Nonetheless, recognizing that the states must promulgate rules to implement new Certificate of Public Advantage (COPA) legislation, the FTC offered to consult with the states to ensure that the reviews of Cooperative Agreement applications are based on a rigorous competition analysis.

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Dionne Lomax