FTC Opposes Indiana’s First Hospital Merger Under Controversial COPA Law

Dive Brief:

• The Federal Trade Commission is urging Indiana to block a hospital merger that antitrust regulators say will raise costs and lead to worse outcomes for patients.
• On Thursday, the FTC submitted a comment with the Indiana Department of Health asking it to oppose the combination of Union Hospital and Terre Haute Regional Hospital on the state’s western border — two hospitals that proposed their merger under a controversial certificate that opponents say allows problematic mergers to pass regulatory review.
• Union’s proposed acquisition of Terre Haute Regional — a facility owned by mammoth for-profit hospital operator HCA Healthcare — will likely increase hospital costs while negatively impacting healthcare services in Indiana, the FTC argued in its letter. It could also depress wages for registered nurses in the state.

Dive Insight:

Union Hospital’s parent company Union Health announced plans to acquire Terre Haute Regional in September 2023. Specifically, the hospitals are proposing to merge under a certificate of public advantage, or COPA.

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 enacted in 2021.

But allowing Union and Terre Haute to merge could potentially be very bad for Indiana, according to the FTC’s letter to state regulators.

Union and Terre have provided insufficient evidence that the potential benefits from their merger would outweigh potential harms, which should disqualify them from receiving a COPA, the FTC argues.

“Any cost savings or quality benefits of the merger would need to be extraordinary in order to outweigh the significant competitive harm that is likely to result from the merger, and there is no indication that this is the case,” the FTC’s letter reads.

Meanwhile, by eliminating existing competition between the two hospitals, the deal could raise costs in a state that already deals with some of the highest hospital prices in the country, regulators warned. Union and Terre Haute Regional are close competitors in the same market — the two acute care facilities, which both provide inpatient and outpatient services, are less than six miles from one another.

Indiana’s Vigo County would likely see the largest effects if the merger goes through, as the combined entity will control nearly 74% of all inpatient hospital services for commercially insured patients, the FTC said. By comparison, mergers resulting in a combined 30% market share are viewed as illegal under antitrust laws.

“The proposed merger far surpasses that bar,” the letter reads.

In addition, Union and Terre Haute Regional don’t need to combine to keep their doors open — both hospitals are financially stable and able to continue standalone operations, according to the FTC, which reviewed the hospitals’ financial statements between 2018 and 2023. Each hospital has been profitable each year during that period, regulators said.

Moreover, Terre Haute’s parent company HCA is one of the most profitable hospital chains in the U.S., generating over $6 billion in net income last year.

In defending their merger, the hospitals have pointed to the COPA statute, which doesn’t allow them to increase medical prices at a faster rate than the consumer price index. However, Union and Terre Haute’s COPA application does say they might shut down some services, such as trauma, wound care, intensive care and pediatrics, at one facility to consolidate it in the other.

In a statement, Terre Haute Regional implied that the success of the merger is up to Indiana, not the FTC.

“Indiana Department of Health is the regulatory body that is reviewing the community benefits of this transaction. We have worked extensively with the Department of Health since the initial COPA application was submitted to make sure they have the information needed to make an informed decision regarding the healthcare needs of Vigo County,” said HCA spokesperson Anne Marie Foote over email.

Union Health did not respond to a request for comment.

The FTC has a long history of advocating against COPAs, arguing they 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 before they were hospitalized more than triple since it was formed by a COPA in 2018, according to KFF Health News.

In another, Mission Health in North Carolina’s commercial inpatient prices increased at least 20% while it had a COPA and at least 38% after its COPA was repealed, according to the FTC.

The FTC has had some success with opposing COPAs in the past. Last year, SUNY Upstate Medical University and Crouse Health System in New York abandoned their proposed merger after federal antitrust regulators opposed their COPA application.​