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Two hospitals in the Syracuse, New York, area — SUNY Upstate and Crouse — have been trying to quietly push through a merger recently, forging ahead with plans to join together without giving local residents or journalists much insight into what their marriage would mean. What is clear, though, is that the merger would reduce the number of hospital systems in Syracuse to two, with the combined Upstate/Crouse entity controlling about 71 percent of the market.
While the general secrecy around the deal is, of course, a big problem, one aspect of the merger proposal is particularly troubling: The hospitals are applying for what’s known as a certificate of public advantage, or COPA for short. If granted, it would give the new hospital system significant powers to harm patients and drive up health care costs in the local community.
In fact, COPA deals across the country should be tossed into the dustbin of history, never to be spoken of again.
COPA laws, which exist in 17 states, allow hospitals that want to merge to be immunized against federal antitrust law, which is meant to prevent harmful mergers, in exchange for supposedly enhanced regulations at the state level, including price controls and the like. Nine states have approved hospital mergers under these laws: North Carolina, South Carolina, Montana, Maine, Minnesota, West Virginia, Tennessee, Virginia, and Texas.
Trading federal antitrust scrutiny for more direct state regulatory control may sound OK in theory, but in practice these laws have become a boondoggle, allowing hospitals to create monopolies and then escape any meaningful accountability when they use their monopoly power to hike costs and harm workers and patients.
The Federal Trade Commission this week released a report outlining just how bad COPAs have been in the places where they’ve been applied. Recently, the FTC has worked with state officials to block a series of hospital mergers, in New Jersey, Utah, and Rhode Island, so it very much has an interest in not allowing the proliferation of state-level deals that get in the way of its ability to do that job.
“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. Instead, the FTC’s report pointed to a host of bad outcomes at hospitals governed by COPAs: Higher costs for patients, lower wages for staff, including nurses, and declines in the quality of care.
Why does that happen? Here’s the FTC’s explanation:
COPAs can be extremely difficult to implement and monitor, requiring significant state resources over many years, sometimes decades. Regulatory fatigue, staff turnover, and changes in funding priorities at state agencies can lead to less vigorous supervision over time. Also, the hospitals subject to COPAs often lobby for repeal of COPA oversight or fewer COPA conditions, citing costs and difficulties of compliance. When this happens, the practical effect is that the merged healthcare system that was previously subject to state COPA oversight is then able to exercise increased market power (in most cases, monopoly power) unconstrained by either state regulation or antitrust enforcement against merger-related harms.
It’s a pretty classic regulatory bait and switch that’s at work here. The hospitals argue for a COPA, instead of being subjected to merger scrutiny from the FTC, which has the potential to derail the merger entirely. When they receive said COPA with its included restrictions, they then turn right around and lobby to either kill off the COPA entirely or to toss its requirements in the trash.
The result is a hospital free from meaningful oversight from either the feds or state regulators. Indeed, making the point that the hospitals want COPAs so they can eventually escape out from under them, the FTC found that it’s actually the post-COPA period, after the deal has either expired or been weakened, when patients see the largest jumps in cost.
For example, costs at the Southern Maine Medical Center in Maine jumped 50 percent after its COPA was allowed to expire in 2015. At the Benefis Health System in Montana, it was 20 percent. At the Mission Health System in North Carolina, costs increased by 25 percent during the COPA years, and then 38 percent following the deal’s expiration.
It would have been far better, in those instances, for the merger to be blocked at the outset by the FTC or state antitrust enforcers, rather than state lawmakers creating a hard-to-enforce regulatory regime that was eventually allowed to just disappear into the night.
So a bleak future could be in store for Syracuse patients if their local hospitals receive the COPA they’ve applied for, which would be the first issued in New York State since it passed a law authorizing such deals in 2014. The hospitals and the New York State Health Department have thus far refused to give local journalists the COPA application that the hospitals submitted, because of course they have.
In states that have COPA laws, but don’t have any active deals with hospitals, the simplest thing to do to prevent the sort of bad outcomes the FTC laid out is to repeal those laws outright, before any damage is done. In states with active COPA deals, though, it’s not that easy, since scrapping the laws would have the adverse effect of freeing hospitals from whatever oversight they currently have. In those places, state officials should not approve any more COPA deals, and need to dedicate the proper resources to policing those that already exist.
Hospital monopolies are some of the most pernicious out there, because their harms don’t just manifest as higher prices, lower wages, reduced privacy, or slower business formation, but in the midst of literal life and death events. Anything, including these COPA laws, that greases the skids for more hospital monopolies, is bad news.
Just remember, the only good Copa is the America kind.
This post initially appeared in a slightly different form on the author’s Substack, Boondoggle, on August 18, 2022.
Pat Garofalo is the author of The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, the Boondoggle Newsletter, and the director of state and local policy at the American Economic Liberties Project.