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There’s an important health care issue that is (understandably) flying under the radar: certificates of public advantage (COPAs), which are grants of antitrust immunity for hospital mergers conditional on active state regulation.
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Many are predicting that hospital consolidation will accelerate with the financial struggles brought on by COVID https://www.modernhealthcare.com/mergers-acquisitions/after-pandemic-induced-delays-healthcare-deals-should-speed-up
Some state leaders might think: “If hospitals are going to merge, we should put conditions on the merger to protect consumers,” like what MA did with the Beth Israel/Lahey merger https://www.healthcaredive.com/news/beth-israel-lahey-health-merger-cleared-with-conditions-including-price-ca/543342/
That’s basically the idea behind COPAs: the state places conditions on a hospital merger (e.g., limit price increases, maintain quality, improve access, etc.) and, in exchange, the merging hospitals get antitrust immunity, so federal enforcers can’t challenge them.
Recently, COPAs have come back into fashion. The only two hospitals in San Angelo, TX are planning to merge under the protection of a COPA. https://www.gosanangelo.com/story/news/2020/04/20/community-hospital-being-sold-shannon/5167745002/
Likewise, the only two hospitals in Abilene, TX are planning to merge under the protection of a COPA. https://www.reporternews.com/story/news/2020/04/27/hendrick-health-system-acquiring-abilene-regional-brownwood-regional/3036086001/
All but one of the hospitals in the Columbia, SC CBSA, representing 77 percent of Columbia’s bed capacity, are combining, also under the protection of a COPA. https://www.wistv.com/2020/03/05/prisma-health-add-three-hospitals-with-acquisition-kershawhealth-providence-health/
These recent announcements follow COPA-protected mergers in the tri-cities region of NE TN/SW VA and Huntington, WV, both in 2018 https://www.facingsouth.org/2019/10/appalachian-hospital-merger-exposes-tension-over-rural-health-care-access
What are the long-term effects of hospital mergers shielded from antitrust enforcement with COPAs? We studied three COPA-protected hospital mergers from the 1990s/2000s.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3634577
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3634577
The evidence is mixed on their effectiveness: some COPAs were effective in constraining prices, others were not.
However, all but one of the COPAs from the 1990s/2000s are no longer in effect, leaving unregulated hospital systems with market power. After COPAs are removed, prices spike, in some cases by 20-40%.
While the evidence on quality is more limited, it suggests that COPA-protected mergers also lead to reductions in the quality of care.
Overall, states should carefully consider the risks of higher long-run prices and reduced quality when thinking about the use of a COPA.
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