Federal approval of hospital transactions may not be required in certain states.
Hospitals secured a major victory in their battle with the Federal Trade Commission (FTC) over regulatory requirements for mergers and acquisitions.
A U.S. district judge ruled in favor of LCMC Health's purchase of three Tulane University hospitals from HCA Healthcare, granting the health system's request for a summary judgement that the transaction was exempt from federal antitrust laws.
The ruling backed the power of state certificates of public advantage (COPA), which allows mergers and acquisitions to avoid federal approval if they receive oversight from the state. LCMC and HCA argued that the deal was exempt from pre-notification requirements implemented under the Hart-Scott Rodino (HSR) Act—notifying federal antitrust authorities and observing a 30-day waiting period—because of the issuance of a COPA from the Louisiana Department of Justice.
The FTC has lobbied against COPAs, claiming that transactions exempt from federal antitrust requirements have led to higher costs and worse outcomes.
Judge Lance Africk wrote in his ruling that "the court appreciates that this holding may make enforcement more difficult for the FTC in the narrow context of transactions that close pursuant to state COPAs."
Greg Feirn, LCMC Health CEO, said in a statement: "We are pleased to announce that the District Court has recognized the value of our partnership with Tulane University and upheld the State of Louisiana's approval. Earlier this year, LCMC Health and the Attorney General Jeff Landry took a strong stance by taking legal action to safeguard this significant collaboration. This partnership underwent a thorough review and approval from the Louisiana Department of Justice, which has been validated by the court's decision."
Due to the ramifications of the ruling, the FTC may pursue an appeal. Nevertheless, the decision is noteworthy in that it strengthens protections for hospital transactions from federal oversight.
By securing a state COPA, hospitals can avoid requirements under the HSR Act, including the 30-day waiting period. The FTC has also recently proposed sweeping revisions to the HSR Act, which would greatly increase the burden on hospitals.
However, not every state has COPA laws. Currently, 19 states have some version of a COPA law, so hospital transactions outside of those states won't be able to skirt federal approval.
Jay Asser is the contributing editor for strategy at HealthLeaders.
KEY TAKEAWAYS
LCMC Health's acquisition of three hospitals from HCA Healthcare was approved without meeting federal antitrust laws because of Louisiana's issuance of a certificate of public advantage (COPA).
By securing a state COPA, hospital transactions may be exempt from pre-notification requirements implemented under the Hart-Scott Rodino Act, including a 30-day waiting period.