Experts say state oversight is the last line of defense in a hospital monopoly.
At a recent Federal Trade Commission workshop, some said the agreement that created Ballad Health is raising the standard for active supervision. Others argued it’s insufficient.
Why active supervision matters
Certificates of Public Advantage rely on active supervision to protect patients when states opt to rid of health care competition and remove antitrust scrutiny from the federal government.
Law Professor James Blumstein, director of Vanderbilt’s Health Policy Center, said, “The states must not only have the power but exercise the power and exercise it on an ongoing basis so that this can’t be them state rubber-stamping a private conspiracy.“
“What can go wrong is they stop doing that active supervision and suddenly you have a monopoly that’s unobserved,“ said Urban Institute Fellow Robert Berenson.
Berenson described a risk called “regulatory capture,“ where a hospital system may become so politically powerful that they prevent state scrutiny.
Officials in North Carolina and Montana, where COPAs have come and gone, said the process was riddled with politics and attempts to evade regulation.
They said these influences likely led to their COPA legislation being repealed, leaving the community vulnerable to price increases.
“The overall feeling is that COPAs are something those states wish they would’ve avoided,“ said Dan Pohlgeers, representing Sunesis Medical Consulting and Tennessee’s Local Advisory Council at the workshop.
Erin Fuse Brown, a Georgia State University law professor who published a report on Ballad Health, called COPAs a risky undertaking. She said states have to remain vigilant until new competition enters the market, even if that’s decades away.
“If anyone has done this well, Tennessee and Virginia have,” Fuse Brown added.
Raising the standard or insufficient?
If you ask advocates, their position is clear.
“Despite the motto, ‘It’s your story and we’re listening,’ Ballad Health is not listening,“ said Dani Cook.
Indivisible Greene County’s Lena Kendrick Dean said, “We want to know answers, and they have not been very forthcoming about answers.“
Cook and Kendrick Dean said state supervision of Ballad Health has been insufficient.
Ballad’s CEO Alan Levine said otherwise.
“Not one COPA that’s ever been done even comes close to the scrutiny that we have,“ he said. “It’s just wrong to say that the public doesn’t have a voice in this, they can complain to the state and the state will investigate.“
In the case of COPA repeal
Levine said regulators learned from the mistakes of other states while building their framework.
“If the statute is ever changed or repealed like they did in North Carolina, there’s language in the COPA that says the terms of the COPA would continue to apply,“ he said.
Janet Kleinfelter, representing Tennessee’s Attorney General’s Office, said the repeal of the act anytime prior to the 25th anniversary of the COPA issue date would not cause termination or withdrawal of the COPA or the Terms of Certification.
She also referenced a provision that would keep pricing controls under the COPA intact:
“The provision of Addendum 1 setting forth pricing limitations and requiring refunds for Excess Payments (i) shall survive termination of the COPA, termination of these Terms of Certification, repeal of the COPA statute, termination or dissolution of the New Health System, or the New Health System or any part of it being placed in bankruptcy, receivership, or otherwise being transferred in whole or in part to any other person or entity; and (ii) shall last until the Department determines that they are no longer necessary to prevent anti-competitive conduct, to protect Payor contracts which were negotiated prior to the termination of the COPA, and to identify and address any Excess Payments which existed prior to termination of the COPA.“
“We take our responsibility for active supervision very seriously,“ said Deputy Commissioner for Governmental and Regulatory Affairs Joseph Hilbert, who represented the Virginia Department of Health at the FTC workshop.
“I would say a take away for me is that we’ve done a lot of good work, but we have a lot more work to do,‘ he said.
Hilbert said Virginia is still in the process of forming its active supervision framework.
Tennessee has already established its Local Advisory Council, an oversight body that holds annual meetings and issues an annual report based on public feedback.
Hilbert said they’re hoping to finalize a memorandum of understanding with the Southwest Virginia Health Authority in the near future. “They will be our eyes and ears on the ground in Southwest Virginia, which is very important,“ he said.
This comes at a time when many advocates feel access in Southwest Virginia, in particular, has been adversely impacted by Ballad Health’s changes.
Hilbert said the department is also planning to meet with their Tennessee counterparts to revise population health metrics, meant to track commitments that the Federal Trade Commission described as vague ahead of the merger’s approval.
Hilbert said one of their biggest challenges thus far has been gathering data and establishing baselines for these metrics.
Unlike Tennessee, he said Virginia doesn’t plan to assign Ballad annual grades.
Tennessee is expected to score Ballad for the first time in spring 2020.
“In terms of performance, what I can tell you right now is it’s too soon to tell. We’ve only been in effect for 16 months,“ said Kleinfelter.
She said they won’t be able to meaningfully evaluate the COPAs efficacy for several years.
A member of Tennessee’s Local Advisory Council said the state shouldn’t allow the merger to progress this summer on these grounds.
“I think the state should strongly consider holding off on the consolidation of those assets. We heard from virtually everybody on the panel that this has been a very difficult process for Ballad,“ said Pohlgeers.
Under the ‘Revised Plan of Separation,’ Mountain States Health Alliance and Wellmont Health System are prohibited from transferring any ‘Material Operating Assets,’ or assets that exceed 10 percent of Ballad Health’s total assets, until 18 months after the closing of the COPA application.
Pohlgeers said Ballad shouldn’t be able to further merge their assets until the effects of the COPA are more clear.
“There is clear and convincing evidence,‘ said Levine. “The state found that there was clear and convincing evidence before approving the merger.“