Last week, the FTC issued a policy paper addressing certificate of public advantage (COPA) laws, which have been enacted in nineteen states to shield certain hospital mergers and acquisitions from federal antitrust review. Continuing the trend of the FTC’s increasing focus on healthcare, the FTC paper argues that COPA laws are detrimental and result in higher prices, reduced quality of care, and slow wage growth for certain hospital workers.

A total of nineteen states have enacted COPA laws, which generally provide for state officials to allow hospitals to consummate mergers and acquisitions that would otherwise violate antitrust laws if the officials determine the benefits of the combination outweigh the disadvantages from any reduction in competition. COPA laws also generally allow the states to impose conditions on the approval—including price controls, cost savings mechanisms, and commitments regarding commercial insurance contracts—to mitigate harmful effects they may anticipate. If a COPA is granted, the transaction may be shielded from federal antitrust enforcement actions under the state action doctrine. COPA laws are distinct from certificate of need (CON) laws, although COPAs may be administered under the same agency as a state’s CON program.

The policy paper notes that the FTC is aware of nine states that have approved hospital transactions under COPA laws and includes case studies analyzing the changes in prices and wage growth following the transactions. In some of the case studies, the COPA laws were repealed after the transactions were consummated, resulting in the removal of regulatory oversight and restrictions. Based on these examples, the FTC argues COPAs “can be difficult to implement and monitor over time, and are often unsuccessful in mitigating merger-related price and quality harms.” Consequently, FTC staff recommends state legislatures to consider either repealing COPA laws or, in states that have already issued COPAs, ending the issuance of new COPAs while leaving the existing laws in place in order to continue regulating hospitals that have already combined.

The Commissioners voted 5-0 in favor of issuing the policy paper.

A copy of the policy paper is available here and the accompanying fact sheet is available here. The FTC’s press release announcing the policy paper is available here.