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Hospital mergers and public accountability: Tennessee and Virginia employ a certificate of public advantage
Hospital mergers and public accountability: Tennessee and Virginia employ a certificate of public advantage
- Collection:
- Health Policy and Services Research
- Author(s):
- Fuse Brown, Erin C., author
- Contributor(s):
- Milbank Memorial Fund, issuing body.
- Publication:
- New York, NY : Milbank Memorial Fund, September 2018
- Language(s):
- English
- Format:
- Text
- Subject(s):
- Antitrust Laws
Health Facility Merger -- organization & administration
Social Responsibility
Tennessee
United States
Virginia
United States. Federal Trade Commission - Genre(s):
- Technical Report
- Abstract:
- Mergers of all types are going on across the health care system. In some cases, they are horizontal mergers in which the same kinds of entities are coming together. In other cases, they are vertical mergers in which different types of health care entities are coming together. There are various and sometimes shifting rationales presented by the merging providers—to improve the quality of care, to preserve and grow employment, to build capacity in order to manage the needs of entire populations, or to do more clinical research, gain greater leverage with large payers, or preserve essential community services. Regardless of the "cause," the effect of proposed consolidations poses great challenges to state regulators and policy¬makers. These new entities are large and economically and politically powerful institutions. Moreover, in spite of applicant claims, the evidence from hospital consolidations is clear---they raise rather than lower operating costs. Finally, the standards by which mergers are usually evaluated reflect fundamentally conflicting policy desires to see health care as a service that providers compete to provide, and a public good provided by institutions with deep and fundamental public obligations. These conflicts are heightened when the consolidation results in the creation of a monopoly provider with a significant portion of the services provided. Without reasonable alternatives to the provider, what will be the motivation for the consolidated provider to deliver high-quality medical services at a reasonable price? State and federal laws can grant state officials the authority to create and oversee such service monopolies through the issuance of a certificate of public advantage (COPA), where the advantage of the monopoly accrues to the public, not the organization. Although never simple to establish and oversee, and not always politically popular, COPAs may be the only alternative states face to denying monopoly-creating provider consolidations. This report, written by Erin C. Fuse Brown, JD, MPH, from Georgia State University College of Law and the Center for Law, Health, and Society, captures the response to a proposed merger that would create virtually a single hospital provider for a large swath of rural Tennessee and Virginia. The report analyzes the process by which officials in both states developed their COPAs and the resulting standards and enforcement tools. The report also addresses the environment in which the COPA evolved, the application process, the role of each state, and policy implications for other states. The report raises interesting policy questions: (1) First, we can view COPAs in the context of federalism. A new state regulatory scheme evolved as a substitute for federal antitrust scrutiny. Industry advocated for the states to take this on, even if it meant more state regulation. The two states ended up taking more control and responsibility for the processes and outcomes. (2) Unlike the federal authorities that review anti-trust matters, states have multiple roles in overseeing their health care systems. In addition to scrutinizing anti-trust concerns, states are also trying to address hospital closures (particularly in rural areas) and making new investments in population health. A COPA provides a comprehensive way to address these issues. (3) A COPA requires a balance between collaboration and regulation. States and health systems need to establish a different relationship blending old and new roles. Is the result of this new relationship an innovative partnership or does it produce conflict and confusion? (4) Finally, as illustrated in the report, patients and providers cross state lines--so might oversight standards. When mergers stretch across state boundaries, it can be challenging to mesh pre-existing state laws created over different time frames. By adopting similar COPA laws, two states could more readily coordinate their review and oversight. State officials will continue to entertain requests from providers to consolidate. A portion of these would create organizations with great economic leverage and concomitant community responsibilities. While it is too early to tell what will happen as a result of the Tennessee-Virginia COPA decisions, state health policymakers and others interested in this field can learn from what has transpired there so far.
- Copyright:
- Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY license. (More information)
- Extent:
- 1 online resource (1 PDF file (47 pages))
- Illustrations:
- Illustrations
- NLM Unique ID:
- 101755063 (See catalog record)
- Permanent Link:
- http://resource.nlm.nih.gov/101755063