Mid-Atlantic Health Law TOPICS

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Rural Hospital Monopolies

Antitrust laws can be used to prevent mergers that create a monopolistic entity that controls a service in an area and can thereby raise prices or initiate other anti-competitive actions. However, in the health care context, sometimes monopolies can be lifesaving.

Also, for more than 50 years, the courts have held that activities adequately supervised by a state are exempt from antitrust scrutiny. That exemption has led to the creation of Certificates of Public Advantage (COPAs). 

COPAs are state law creations that allow hospital system mergers to create monopolies, exempt from the antitrust laws, with the caveat that the resulting entity will be subject to increased monitoring and reporting requirements.

For people in rural communities, this can make the difference between having access to care in the area or not as smaller entities have struggled to stay open.

Though requirements vary by state, COPAs typically require hospitals to report a range of metrics, including data on price, quality of services, access to services, and impact on population health, often measured across more than 50 variables.

COPAs can also require hospitals to spend money on outreach programs, maintain certain services and expand labor protections for hospital employees.

A.  Ballad Health

Most recently, Virginia and Tennessee worked together to allow a COPA merger between two health systems at their shared border. The resulting entity, Ballad Health, now serves 1.2 million residents at various locations in a largely rural area where smaller entities have struggled to survive.

Both states have agreements with Ballad, with the expectation that the larger merged entity will be able to improve the historically poor health outcomes in the area. Regulators are committed to the success of the entity, as demonstrated by Virginia having two full-time employees dedicated to monitoring Ballad’s performance and adherence to the regulatory requirements, in addition to many other employees across several agencies who play a part in the oversight.

The risk of a large entity with no competition is that it could deliver poor or limited services or charge inflated prices. The rigorous oversight in place is designed to prevent that, and COPAs come with various tools for regulators to keep the entities in check.

For example, Tennessee and Virginia have set a price cap for services at Ballad based on Medicare rates. While hospital price setting has long been a staple of Maryland policy, it is not routine in other parts of the country.

These COPAs also allow states to implement injunctions, to require corrective action plans or even to end the contract with the states if the entity is not meeting program requirements. Tennessee can also issue fines for misconduct or poor performance, although Virginia’s law does not allow for financial penalties.

B.  Prevalence

COPAs are not available in Maryland.  Twenty-eight states have allowed COPAs, though five have subsequently repealed their laws either because hospitals were not taking advantage of the opportunity to merge or because the oversight requirements were viewed as no longer necessary. 

Critics of COPAs argue that if a merged entity is insufficiently monitored or no longer monitored, such as when North Carolina’s COPA was repealed, the hospital can quickly turn into a monopolistic entity with little benefit for the local population.

Stakeholders around the country will be observing Ballad for years to see if Tennessee and Virginia have found a manageable way to deliver quality services to rural areas through COPAs.

Alexandria K. Montanio
(410) 576-4278 • amontanio@gfrlaw.com

A version of this article titled “Rural hospital monopolies” was published online by The Daily Record on May 26, 2020, and in print May 27, 2020.