COPAs or Competition: How to protect patients in a hospital ‘merger frenzy’

In Your Corner

Ballad Health is at the center of a nationwide debate on whether health care regulation or competition is the best way to protect patients amid what some experts are calling a hospital ‘merger frenzy.’

That conversation came to the forefront at a recent Federal Trade Commission workshop, “A Health Check on COPAs.” 

MORE: Federal Trade Commission may study Ballad Health’s impacts

“This matters because we want patients to have access to high-quality, affordable health care,” said Stephanie Wilkinson, attorney advisor for the FTC’s Office of Policy Planning. “The question is what is the best way to get there.” 

Tension between theories

The FTC has long defended competition as the best way to control costs and improve quality for patients.

When it comes to the courts, they haven’t always won. 

“There was a period where the FTC lost seven cases in a row, and so they brought these cases to prevent mergers on the front end and they didn’t have a lot of documentation about what would happen,” said Law Professor James Blumstein, director of Vanderbilt’s Health Policy Center. 

Blumstein said hospitals were able to make the argument that non-profit institutions behave differently than for-profit systems. 

“That’s a contestable point,” he said. 

Today, unregulated, cross-market hospital mergers are curbing competition across the country, according to Urban Institute Fellow Robert Berenson. He said antitrust law has been largely ineffective at preventing the concentration of these hospitals.

“Economists have demonstrated they have market power to raise their prices but nobody is doing a thing about it,” said Berenson. 

Tim Greaney, UC Hastings College of Law Professor, said hospital mergers are one of the biggest factors behind skyrocketing healthcare costs in the United States. He said that’s because these hospital systems have enormous market power that prevents insurers from negotiating lower prices. 

“The insurer has to pay more for the hospital or physician service. Those prices get passed on to us when we pay our premiums,” Greaney said. 

A recent study suggests market concentration may also have a negative impact on wage growth for hospital-specific employees like nurses and pharmacists.

“Approximately one-third of baseline wage growth gets shaved off by very, very large mergers,” said Elena Prager, assistant professor at Northwestern University’s Kellogg School of Management. “The fewer separate employers you have competing for that workforce the less you have employers driving up pay in order to attract workers.” 

Prager said she would consider Ballad Health a ‘very large merger’ but her study analyzed impacts before the health system was created. 

Amid these problems come Certificates of Public Advantage, a pitch pushed by the American Hospital Association as a way for states to control costs and reduce unnessary duplication of services, according to Blumstein. 

Berenson said COPAs may be an attractive option for regulating health care in rural areas, where he said it’s very rare to find true market competition today. 

“If you don’t have a large enough population base you’re better off not competing and having a single system,” said Berenson. “If markets aren’t working very well elsewhere, why not have a state then put strings attached to a merger?” 

Greaney described COPAs as an imperfect regulatory fix. “They really are Band-Aid and they’re a Band-Aid on the most problematic mergers that there are,” he said, referring to agreements that completely eliminate inpatient competition in a service area. 

COPA legislation requires hospital systems to demonstrate, with clear and convincing evidence, that the benefits of a merger will outweigh any harms attributable to a reduction in competition. 

Since the 1990s, a handful of state legislators and attorneys generals have opted to trade anti-trust scrutiny for active state oversight.

Blumstein said that’s a price many for-profit systems aren’t willing to pay. “There are very few of these COPAs out there because the serious regulation requires basically a regulatory colonoscopy of these hospitals and that’s a pretty painful process,” he said. 

In other words, COPAs come with commitments, such as insurance rate regulations, price caps, promises to maintain rural access and to reinvest savings to improve population health. 

“The only real way you can justify them intellectually in my opinion…it’s that the hospitals are going to spend the money on a worthy purpose,” said Blumstein. 

Among experts, concerns and even more questions remain. Chiefly, are COPAs the answer or just another barrier to higher quality, lower costs, improved access and innovation in healthcare?

“I don’t see this in any way as a black and white issue. That they’re obviously always bad or they’re obviously always good. The details really matter,” said Berenson.

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