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    Feds flex regulatory muscle on health care mergers, board authority

    FTC plays role in recent high-profile health care industry legal entanglements


    State lawmakers also hear from the FTC during the legislative process, before scope-of-practice rules become legally binding. In April 2013, the American Medical Association summarized FTC comments on legislation in five states over a 2-year period. In each case, the FTC unsuccessfully opposed attempts to expand non-physician providers' clinical practice. (Also see the American Medical News article, “When the FTC weighs in on scope-of-practice bills.”)

    Have you read: Single-payer proposals crop up at state, federal level

    When it comes to high-profile hospital system and health insurance mega-mergers, the FTC has been forced into action as a result of industry consolidation precipitated by the Affordable Care Act. The FTC typically challenges a hospital merger when the merged entity will be able to unilaterally raise prices above a competitive level because there will be an insufficient number of competitive alternatives for consumers. Hall Render, a highly regarded health law practice, noted several themes that emerged from three hospital merger challenges issued by the FTC over the course of 6 weeks in late 2015.

    First, when determining the geographic market of a potentially merged hospital system, the FTC defines these jurisdictions "narrowly," expecting patients to stay in their hyper-local area and not travel within their region to obtain care. Since the two hospitals are located in a small geographic area, the FTC argues that taking one or the other out of the competition negates potential benefits to patients and payers. Hall Render attorneys also find that the FTC is relying heavily on commercial payer interviews and testimony, while dismissing agreements with state and local officials, as well as claims of post-merger efficiencies. (Also see, “Hospital merger transactions recently challenged by the FTC.”)

    Facility regulation and the expansion of services in local health care markets have likewise been scrutinized by federal officials in recent months. In a Jan. 11, 2016 letter to South Carolina Gov. Nikki Haley, the FTC encouraged the state to repeal laws that require some health care providers to get state approval before opening new facilities or services and making certain large purchases. The letter warned that certificate of need (CON) laws stifle innovation and competition. New businesses that could provide newer, cheaper, more convenient, or higher-quality services can be deterred with the delay and cost of state approval.

    Related: Competition-stifling facility regulations scrutinized nationwide

    The FTC and Department of Justice frequently urge states to repeal CON programs. Since 2007 alone, the agencies issued formal recommendations to lawmakers in Alaska, Florida, Georgia, North Carolina, and Virginia, among others. In each instance, the agencies cited similar concerns as those in their South Carolina recommendation.

    Health care industry consolidation intensified by the Affordable Care Act holds both promise and concern for physicians, patients, and payers. The FTC has stepped up its investigation of proposed transactions "to prevent business practices that are anticompetitive or deceptive or unfair to consumers." A very steady hand will be required to, pursuant to its mission, "accomplish this without unduly burdening legitimate business activity.

    Next: Hospital merger transactions recently challenged by the FTC


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