Today the Federal Trade Commission issued a policy paper and fact sheet highlighting the pitfalls of using Certificates of Public Advantage (COPAs), which purport to shield hospital mergers from antitrust laws in favor of state oversight. The paper details research showing that these COPAs are often detrimental for patient costs, patient care, and healthcare worker wages.
By issuing Certificates of Public Advantage (COPAs), some states attempted to replace marketplace competition among hospitals with state oversight. According to the paper, although hospitals claim COPAs will help lower costs and improve population health, the evidence indicates otherwise. The paper presents research showing that several hospital mergers subject to COPAs have resulted in higher prices and reduced quality of care, despite regulatory commitments designed to reduce these anticompetitive effects. The paper also describes a recent study showing that mergers significantly increasing hospital concentration—like those found where COPAs exist—slow wage growth for nurses, pharmacy workers, and certain other non-medical skilled workers.
“Despite hospital claims that COPAs will result in lower costs and improved population health outcomes, we are not aware of any proven benefits of COPAs,” said FTC Director of Policy Planning Elizabeth Wilkins. “We urge state lawmakers to consult local health insurers, employers, and workers regarding the potential impact of COPA legislation.”
According to the paper, most COPAs have resulted in a single hospital monopoly, and concentrated healthcare markets tend to increase healthcare costs and reduced quality. When hospitals have substantial market power, their negotiating leverage with health insurers increases and they often are able to demand higher prices, which are then passed on to consumers in the form of higher premiums, copayments, deductibles, and other out-of-pocket expenses. This holds true with for-profit as well as not-for-profit merging hospitals. Also, employers facing higher costs may limit insurance coverage for their employees or eliminate insurance coverage altogether. Studies show that rising healthcare costs caused by hospital consolidation are often passed through to employees in the form of lower wages and less generous benefits.
Other effects of reduced hospital competition include fewer incentives to maintain or improve quality and patient access to care. Studies demonstrate that the net effect on quality when competing hospitals merge is often negative, and that increased competition is associated with better quality.
Finally, a recent study showed that mergers that significantly increase hospital concentration in local labor markets, reducing the number of hospital employers, and that four years after the mergers occurred, nominal wages were 6.8% lower for nurses and pharmacy workers and 4.0% lower for non-medical skilled workers than they would have been without the merger.
By contrast, according to the policy paper, most studies show that competition among health systems – not consolidation – results in the greatest price constraints and quality benefits for patients, as well as optimal wage benefits for employees.
In recent years, FTC staff has seen a resurgence in COPA laws, which immunize provider mergers from antitrust scrutiny. In some situations, state legislatures have passed COPA legislation with the intent of exempting specific proposed hospital mergers from anticipated antitrust challenges.
In 2017, the FTC announced a policy project to assess the impact of COPAs on prices, quality, access, and innovation for health care services. This project has included research of past COPAs, a public workshop highlighting practical experiences with COPAs and related policy considerations, and an ongoing study of recently approved COPAs. The studies of past COPAs have revealed significant increases in commercial inpatient prices, as well as declines in quality of care.
More broadly, access to affordable healthcare is of the utmost importance to American consumers. Promoting competition in the healthcare sector is a key priority for the FTC, including preventing anticompetitive hospital mergers. The Commission has recently taken steps to prevent several healthcare provider mergers, including Hackensack/Englewood in New Jersey; Lifespan/Care New England in Rhode Island; RWJBarnabas/St. Peter’s in New Jersey; and HCA/Steward in Utah.
The Commission voted 5-0 to issue the policy paper.
For more information, visit www.ftc.gov/copa.