West Virginia passes health care law despite FTC staffs’ competition concerns

West Virginia Governor Earl Ray Tomblin has approved legislation, exempting certain actions of the state’s Health Care Authority from state and federal antitrust laws and immunizing certain cooperative agreements approved and subject to supervision by the Health Care Authority. The measure, Senate Bill 597, was passed, despite concerns stated by the FTC staff that the legislation will harm health care competition and consumers in West Virginia.

The bill was introduced after the FTC announced it was taking action to block the proposed merger of two West Virginia hospitals: Cabell Huntington Hospital and St. Mary’s Medical Center.

The legislation exempts certain cooperative agreements from federal antitrust law, including mergers and acquisitions among health care providers, so long as one of the providers is a member of an academic medical center. In a letter sent to state representative Mike Pushkin (D-Kanawha), staffs of the FTC Office of Policy Planning, Bureau of Competition, and Bureau of Economics stated that antitrust laws already allow efficient health care collaborations and that these cooperative agreement provisions may effectually create an undue additional regulatory barrier to procompetitive agreements. In addition, the combined effect of the cooperative agreement provisions and the exemption provisions seem “unnecessary and likely harmful,” the staffs claimed.

“FTC staff are deeply concerned that the Bill would mainly serve to encourage mergers and conduct that likely would not pass muster under the antitrust laws because they would reduce competition, raise prices, diminish incentives to improve quality, and provide relatively small or no benefits to consumers,” the letter stated. Although the cooperative agreements are supposed to include a teaching hospital, the competitive harm would originate from the loss of competition between two or more other hospitals or health care providers that are permitted to join the cooperative agreement, the staffs further claimed, and the anticompetitive effects might spread well beyond the teaching hospital.

Lastly, the staffs asserted that because the antitrust laws already allow efficient and pro-consumer collaborations and mergers among competing health care providers, the exemption provisions of the legislation may encourage groups of private health care providers to engage in “blatantly anticompetitive conduct.”