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Ballad Healthcare’s Johnston Memorial Hospital in Abingdon.

The Federal Trade Commission asked a Vanderbilt University law professor to set the stage for a discussion on state laws that shield merging hospital rivals from antitrust actions.

In the audience were health care executives convinced that these laws save hospitals from closure and improve people’s health, state regulators charged with overseeing entities with which they had little experience, insurers who think monopolies harm their customers, and people in Virginia’s coalfields who believe they are losing vital services as a result of a recent merger.

“There’s a story I like to tell about the importance of promoting understanding and common terminology,” said James Blumenstein, director of Vanderbilt’s Health Policy Center. A visiting jurist from Great Britain told him about an effort by his country to get a sense of the demographics of the courts. Questionnaires were sent to the chief judge in each district asking them to list members of the court broken down by sex.

One chief judge replied that two were broken down by age, three were broken down by alcohol, but none was broken down by sex.

The quip is a reminder that there are different ways to define an issue, none of which is entirely correct or entirely wrong.

For decades, the FTC has viewed state laws called COPAs, for Certificate of Public Advantage, as a way to circumvent the commission’s authority to assess whether the benefits of a hospital merger outweigh the disadvantages of pricing, access and quality that could come with monopolies.

Hospital mergers and acquisitions occur frequently. From January to April of this year, 17 deals closed, according to Becker’s Hospital Review. All went through FTC review, and some involved mega companies’ expansions, such as HCA Healthcare acquiring the health system in Asheville, North Carolina, and gaining a foothold into a new state.

What makes mergers under COPA laws different is that they involve two systems in the same place that compete against each other. This is what happened last year when Mountain States Health Alliance and Wellmont Health System formed Ballad Health.

Ballad has a geomonopoly covering a million people living in an area about the size of New Jersey. For people in Virginia’s coalfields and Tennessee’s Tri-Cities region, there is now no competing hospital nearby to turn to for care.

In exchange for such monopolies, states, through COPAs or cooperative agreements, can require conditions designed to hold down costs and open up access. Virginia and Tennessee are requiring Ballad to spend tens of millions of dollars on efforts to improve the health status in Central Appalachia, where people tend to be unhealthier and to die earlier than those living in most other regions in the country.

There are theories, anecdotes and rhetoric, but little empirical research that examines whether the benefits of COPAs outweigh the disadvantages, or whether patients pay more and have less access to quality care when competition ceases.

Shortage of empirical data

The FTC is seeking to encourage that research through a COPA Assessment Project. Earlier this month, it held a day-long workshop for scholars to present research on now-defunct COPAs in Montana, Georgia and North Carolina and an ongoing one in South Carolina, and to take a look at how Tennessee and Virginia regulate Ballad and its impact so far on care and access in the region.

“While we understand and are sensitive to the challenges faced by providers in today’s complex health care ecosystem, we generally think antitrust law is flexible enough to let pro-competitive deals proceed, while targeting only those transactions that would truly harm consumers,” FTC Chairman Joseph Simons said. “Having said that, we also believe that the FTC’s enforcement and policy decisions must be grounded in sound economics and rigorous empirical analysis.”

Simons said there is also a lack of understanding as to what happens in a market when a COPA expires and the state stops regulating a monopoly.

In Montana, a COPA kept prices in Great Falls in line with comparable hospitals throughout the state and the Great Plains, but once it went away, inpatient costs rose more than 20%, said Christopher Garmon of the Bloch School of Management, University of Missouri Kansas City.

But, Garmon said, his study of Benefis Health System was limited by available data. He could look only at prices for certain inpatient services, and he could not assess quality or access.

Other presenters said they faced similar challenges in assessing COPA mergers in Columbia, South Carolina; Albany, Georgia; and Asheville. Once North Carolina abolished its COPA law, Asheville’s nonprofit Mission Health was sold in January to HCA Healthcare for $1.5 billion.

The studies compared prices charged by a monopoly and by its peers for particular procedures. The researchers did not look at overall patient spending or whether the monopoly directed more outpatient services into hospital buildings rather than clinics so it could charge higher fees.

And as Benefis CEO John Goodnow pointed out, Medicare and Medicaid, the government insurers, pay a set amount regardless of charges; fewer than a quarter of his system’s patients have commercial insurance that also negotiates for discounts.

The one study that sought to look at quality of care was again limited to inpatients, and to the types of factors Medicare measures, including how satisfied patients are with their care.

The studies did not look at whether the monopoly was able to offer additional services, or how the shift in health care to outpatient services affected competition and pricing.

Real test still to come

Only two other health systems are currently under COPAs: Cabell Huntington was recently formed in Huntington, West Virginia, and was not discussed during the workshop, and Palmetto Health, in Columbia, South Carolina, which does have nearby competitors. Other states still have COPA laws or are considering them.

More specific, data-driven answers to the FTC’s questions might come in several years. Ballad is required continuously to report to both states on a number of quality, access and price metrics.

“There is no COPA like this in America — not even close,” said Richard Cowart, outside counsel to Ballad.

Cowart said the states issued hundreds of pages of conditions that regulate how Ballad must behave.

“But that really isn’t the story. The story here wasn’t how to combine and create some efficiencies and improve our bond rating. Or how do we combine and get efficiencies and some revenue flow so we can negotiate with our payers,” he said. “The story here was if we are going to address the health status of our community, where are we going to get the money?”

Cowart said Ballad has made the commitment to use the money it saves through efficiencies to attack the health problems endemic in the region.

“The real test will be in years three, four and five — are they producing the results we’re hoping they will produce,” said Janet Kleinfelter of the Tennessee attorney general’s office.

She said Tennessee looked at experiences in other states and drew upon the same experts the FTC is hearing from to draw up its COPA, and it believes active supervision requires just that.

Tennessee has a local panel tasked with listening to people. One of its members, Daniel Pohlgeers, said he has heard concerns about the downgrading of neonatal and trauma care in Kingsport, ongoing nursing shortages and diversion of patients from hospitals that lacked enough staff in emergency departments, and from physicians who say they’ve had no input into changes. Ballad has said that staffing shortages preceded the merger, that they are addressing them with salary boosts and recruitment, and that consolidating and shifting services will help with staff and patient care.

Dr. Scott Fowler with Holston Medical Group, an independent physician group, said Ballad shut down outpatient surgical rooms in Bristol that directly affected patient care. When his group offered to buy the center, Ballad refused, he said. His group has been able to obtain a certificate from the state to open a surgical center.

“As a result, Bristol went without an open surgical center for quite a few months,” he said. “Will that get fixed? Yes. Did it need to happen? No. It created bad care and bad experiences.”

Fowler said although most health care can be delivered in outpatient settings, he sees Ballad keeping its business centered on hospitals that can charge higher facility fees, and with organizing under the hub-and-spoke model that will leave rural areas vulnerable to fewer services.

Anthem’s John Syer said Ballad’s emergency room physicians are employed by a company that does not have a contract with the insurer, resulting in out-of-network charges to patients.

Cowart said that isn’t the result of COPA, as the company operates across the country without Anthem contracts.

But, countered Syer, in many of those markets customers have a choice to go to an in-network hospital.

Applause broke out several times during Fowler’s and Pohlgeers’ remarks from a group of Ballad’s most vocal critics. They have been staging an around-the-clock protest since the beginning of May in front of Holston Valley Medical Center in Kingsport, Tennessee. They have been sharing stories of problems with care, pricing and access on social media, and encouraging people to provide statements to the FTC.

The FTC will continue through July 31 to take online comments on COPAs. It has received a number of complaints from people served by Ballad.

Many of the changes have occurred in Tennessee, where Ballad is headquartered, but plans are underway that will affect Virginia’s trauma patients and consolidate services in Wise County.

Joseph Hilbert, a deputy commissioner with the Virginia Department of Health, said that it’s too soon to tell whether Ballad will deliver on promises to improve population health, but that its work toward that goal has been impressive.

“This is a part of our state that unfortunately for an extended period of time has demonstrated pretty poor health outcomes in a number of measures. That’s not in anybody’s best interest; certainly not in the state’s interest,” he said. “If we are looking to control health costs we want to take an upstream approach here. It’s easier to keep healthy people healthy later in life than to try and turn around somebody who’s got many conditions going on at the same time. We expect Ballad to be the leader in Southwest Virginia. This isn’t something they can farm out.”

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Luanne Rife writes about the businesses, policies, discoveries and inventions that affect the health of people living in southwestern Virginia.

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