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FTC Drops WVA Hospital Merger Challenge

By John Commins  
   July 14, 2016

The Federal Trade Commission says consolidation of Cabell Huntington Hospital and St. Mary's Medical Center is anticompetitive, but shielded by state law from federal antitrust enforcement.

The Federal Trade Commission has decided to drop its challenge of the proposed merger between two Huntington, WVA hospitals, but not without a parting shot at a recently passed state law that made the "potentially anticompetitive" deal possible.

The commission last week dismissed its administrative complaint challenging the proposed merger between Cabell Huntington Hospital and St. Mary's Medical Center, two hospitals located three miles apart.

While maintaining that the merger would hurt competition in the region and result in higher healthcare costs, the commission dismissed the complaint on a 3-0 vote after West Virginia lawmakers passed a "cooperative agreement" with the hospitals, which was approved by the West Virginia Health Care Authority and the state's attorney general. 

"This case presents another example of healthcare providers attempting to use state legislation to shield potentially anticompetitive combinations from antitrust enforcement," the Commission wrote in a statement.

"The Commission believes that state cooperative agreement laws such as SB 597 are likely to harm communities through higher healthcare prices and lower healthcare quality."

Jay L. Levine, an anti-trust litigator with Washington, DC-based Porter Wright Morris & Arthur LLP, says the West Virginia case reflects the continuing fallout from the U.S. Supreme Court's February 2015 ruling in North Carolina State Board of Dental Examiners vs. Federal Trade Commission.

"If you harken back to some of the previous Supreme Court cases that dealt with state action doctrine, West Virginia passed legislation that empowered a government entity to oversee hospital consolidations and provided a mechanism to actively supervise it," says Levine, a disinterested observer.

"We can surmise the FTC thinks the state did a decent job to qualify for state action doctrine immunity to the antitrust laws, so the merger can't be challenged by federal antitrust authorities."

"They don't like when states try to do it. They don't think it's good for consumers or the healthcare industry and they made that displeasure well known, but nevertheless they have to face the reality that it would be an uphill battle to effectively challenge the merger," Levine says.

2 Steps Toward Immunity

To gain immunity, Levine says states have to do two things:

  1. "Clearly articulate a state policy to displace competition. They usually do that through legislation."
  2. "Provide a mechanism that the conduct is actively supervised by the state, the policy reason behind it being that to ensure that in fact what is being done is in compliance with the state desire to displace competition and nothing else."

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John Commins is a content specialist and online news editor for HealthLeaders, a Simplify Compliance brand.


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