FTC reiterates opposition to controversial Indiana hospital merger

Dive Brief:

• The Federal Trade Commission on Monday again asked Indiana’s health department to reject Union Hospital’s proposed buy of Terre Haute Regional Hospital on the state’s western border, alleging it would raise costs and worsen outcomes for patients and lower wage growth for hospital workers.
• Union Hospital is trying to acquire Terre Haute Regional from its current owner, for-profit hospital giant HCA Healthcare, under a “certificate of public advantage,” or COPA, a mechanism that makes it easier for potentially anticompetitive mergers to pass antitrust review.
• Union refiled its COPA request earlier this year. However, the new application includes many of the same issues as the first, according to the FTC.

Dive Insight:

Union Hospital’s parent company, Union Health, has been trying to acquire Terre Haute Regional for years, first lobbying Indiana to pass its COPA law in 2021 before submitting a formal application for the certificate in September 2023.

COPAs allow states to oversee hospital mergers that prove they’ll benefit the public by improving the quality or accessibility of healthcare services — even if the deals might significantly reduce competition or create a monopoly. Such mergers normally face an uphill battle for regulatory approval by the FTC under federal antitrust law.

If approved, the union of 341-bed Union Hospital and 278-bed Terre Haute Regional would be Indiana’s first merger under the state’s COPA law. Indiana is one of 19 states that allow the certificates.

However, the merger quickly ran into opposition from patient advocates and antitrust regulators who argued it wouldn’t save money and could impact the quality of care for Indiana residents.

The impact would be especially pronounced in Indiana’s Vigo County, where a combined Union-Terre Haute Regional system would hold almost three-fourths of the market for inpatient hospital services, according to the FTC.

Following the pushback, Union withdrew its COPA application in November before refiling it in February. The hospitals say their second application includes new commitments to quality and additional proof that the merger will benefit patients.

But “this repackaged COPA application presents the same problems as before,” Clarke Edwards, the acting director of the FTC’s Office of Policy Planning, said in a statement Monday urging the Indiana Department of Health to deny the COPA.

The second application includes 45 commitments that Union says will mitigate competitive harms, including some new pledges based on Indiana regulators’ responses to its original COPA application.

Yet many of these commitments “are not substantively new,” while “the limited new commitments are largely aspirational and do not change our concerns,” the FTC argues in its comment letter.

Specifically, Union’s price control commitments are unlikely to curb cost growth, and only last for seven years, potentially exposing patients to dramatic price increases when the COPA’s time is up, the FTC said.

Many commitments to preserve patient access to medical services target service lines or facilities that are going to be consolidated or repurposed in the merger, the FTC said. And again, once the COPA ends, there’s no guarantee that Union will maintain the status quo at Union Hospital and Terre Haute Regional, according to regulators.

Union is also pledging to invest tens of millions of dollars into both facilities. But that’s similar to the amount the hospitals’ parent companies are already spending to improve their operations in the usual course of business, the FTC said. Other commitments meant to protect workers, improve population health and expand charity care are also unlikely to benefit the community and are difficult to oversee, according to the agency.

For example, agreeing the state can levy a fine if the merged system fails to report quality metrics won’t force the system to actually improve quality.

Similarly, the state’s power to revoke the COPA is the “opposite of a deterrent,” as it would remove state oversight and leave an unsupervised hospital monopoly in its place, the FTC said.

Notably, the resubmitted COPA application suggests that Terre Haute Regional might be forced to close if the merger doesn’t go through. But that outcome is “unlikely,” according to the FTC. Regulators cited comments from Union Health CEO Steven Holman in 2021 that Terre Haute Regional would remain in the market even absent the merger.

In addition, Terre Haute Regional was profitable from 2018 to 2023, based on financial documents cited by the FTC.

Hospitals often claim that mergers are necessary to prevent closures in order to secure antitrust approval, but that claim rarely holds water, regulators added.

“[Terre Haute Regional’s] profitability both in absolute terms and compared to other hospitals in the United States shows no sign that it is at significant risk of closing if [the Indiana Department of Health] denies the Second Application,” the FTC said.

“As we stated in our Prior FTC Comment and we re-affirm here, competition between Union Health and THRH incentivizes them to drive healthcare costs down and provide superior care, improving patient outcomes. Patients, employers, and hospital employees in the Terre Haute area and throughout Indiana likely benefit from this competition. Should the proposed merger between Union Health and THRH go forward, these benefits would be lost, and Indiana citizens would likely face higher costs and reduced quality of care,” the FTC concluded.

FTC commissioners voted 4-0 to release the letter.

The FTC has long advocated against COPAs, arguing the certificates contribute to adverse consolidation among hospitals. The laws have been increasing, leading the FTC to launch an investigation into their impact in 2017.

According to the agency’s findings (and other studies), COPAs lead to increases in inpatient prices, along with declines in care quality.

In one example, 20-hospital system Ballad Health in Tennessee and Virginia saw its wait times for patients in the emergency room more than triple since it was formed by a COPA in 2018, according to KFF Health News. The Tennessee official responsible for monitoring the COPA said the state’s grading system allowed Ballad to continue operating under the COPA even though it continually failed to meet quality of care standards, according to the FTC.

Similarly, Mission Health in North Carolina’s commercial inpatient prices jumped 20% while it had a COPA, and 38% after its COPA was repealed, the agency said.

If Union and Terre Haute Regional’s merger goes through, commercial prices could rise between 10% and 30%, according to comment filed in the fall by Zack Cooper, an associate professor of public health and economics at Yale University. The deal could also lower wages in the area and contribute to job losses, he said.

Union Health and Terre Haute Regional did not respond to requests for comment.