Health Law Scan

Legal Insights and Perspectives for the Healthcare Industry

The FTC announced on October 21, 2019, that its Commissioners voted 5–0 in support of issuing orders requesting information from five health insurance companies and two health systems to study the effects of Certificate of Public Advantage laws (COPAs) on price, quality, access, and innovation in the healthcare sector. The FTC has demanded an extensive amount of data from the targeted entities by January 21, 2020. Also notable in the FTC’s announcement is that the agency will study the impact of hospital consolidation on employee wages.

COPAs are laws enacted at the state level that permit healthcare providers to merge or enter into agreements that may otherwise be the subject of antitrust scrutiny. The purported goals of COPAs are to reduce duplication of healthcare resources, control healthcare costs, and save hospitals that could or likely would otherwise fail. Although laws vary in states that have adopted COPAs, a COPA is typically issued if the state determines that the benefits of the COPA outweigh its harms. Once the COPA is issued, the merger or combination enjoys state action immunity from federal antitrust enforcement. This has not gone unnoticed by the FTC. In fact, in July 2016 the agency dropped a challenge to a proposed hospital merger in West Virginia after the state passed a law exempting the hospitals from antitrust scrutiny. The FTC has been skeptical of COPAs, and state laws that have stymied recent enforcement activity appear to have only reinforced this skepticism.

The most recent orders do not come as a surprise, as the agency has been ramping up its evaluation of COPAs. In November 2017, it made a public announcement encouraging the study of COPAs. Last June, the FTC held a public workshop to present empirical research on the long-term price effects of three COPAs that were approved in the 1990s. Now, the agency is collecting data that it will compile into a retrospective study on the competitive impact of COPAs. The FTC has stated that it intends to prepare a public report of its findings that it hopes will serve as a resource for states and regulators as they evaluate the pros and cons of COPAs.