FTC Disputes Whether States Can Effectively Displace Hospital Competition with COPA Regulation

As many as 19 states maintain the ability to exercise local control over hospital competition by offering industry participants wishing to merge a certificate of public advantage (COPA).

Hospitals that look to consolidate pursuant to these regulatory regimes typically agree to meet specified quality improvement measurements and adhere to rate-related restrictions in exchange for antitrust immunity.

However, the Federal Trade Commission (FTC) has been openly hostile to COPAs, arguing that states are not equipped to regulate the delivery of health care and urging competition as the only effective solution to health care-related issues in every community. The FTC’s opposition to a recent COPA application in Indiana is an example. After describing a litany of potential anticompetitive effects from a proposed hospital merger, including the loss of tax revenues to the state from the for-profit target entity, the FTC asserted that the “Parties’ COPA application does not include sufficient evidence that the statutory framework would ameliorate [anticompetitive concerns], and the FTC staff is unaware of additional terms and conditions that the [Indiana Department of Health] may impose pursuant to the COPA approval that would mitigate any anticompetitive effects of the merger.”

As COPAs are common, and there remains a desire in many jurisdictions for local control over health care, it is unclear whether Indiana or any other state will give much weight to the FTC’s criticism of their statutory regimes.