On August 15, 2022, the Federal Trade Commission (FTC)—in a bipartisan, 5-0 vote—issued a policy document detailing its concerns with Certificates of Public Advantage (COPAs). The FTC identified six states with active COPA regimes (Maine, South Carolina, Tennessee, Texas, Virginia, and West Virginia) and three states that have repealed COPA regimes (Minnesota, Montana, and North Carolina). Consistent with its past positions, the FTC expressed skepticism about the purported benefits of COPAs and signaled that it may be more aggressive in engaging with state legislatures to discourage the passage and adoption of future COPAs.

COPAs arise from state laws that allow health care providers to enter into collaborative arrangements—including but not limited to mergers—that might otherwise be subject to antitrust review or challenge. A state may adopt a COPA after determining that the proposed cooperation is likely to have benefits that outweigh any disadvantages. Once approved, providers can cooperate free of federal antitrust scrutiny under the “state action doctrine.” The doctrine of state action grants antitrust immunity to private actors when two conditions are met: the state has articulated a clear purpose to displace competition in favor of regulation, and the state provides active oversight of this clearly articulated policy. To meet this active oversight requirement, COPAs typically contain certain terms and conditions, such as price controls, fee regulations, mechanisms for sharing cost savings and efficiencies, public reporting or quality metrics, or other contractual commitments. .

The FTC’s policy document served as the culmination of a policy project the FTC announced in 2017 to assess the impacts of COPAs on pricing, quality, access, and innovation for health services. As part of the project, the FTC researched past COPAs, conducted ongoing studies of recently enacted COPAs, solicited public comments about the benefits or harms that have resulted from COPAs or other regulatory approaches to pricing, and quality of health care, and hosted a public workshop in 2019 examining the claimed efficiencies and benefits in more detail.

Providers may decide to apply for a COPA when they seek to realize certain benefits and efficiencies from a collaboration. For example, a collaboration can help reduce unnecessary duplication of resources and control certain costs. Efficiencies resulting from collaboration can enable providers to participate in new payment and health care delivery models. The FTC’s policy document, however, expressed doubt that those efficiencies and benefits would be achieved.

The FTC’s skepticism is not surprising. FTC staff have previously issued advocacy raising concerns about COPAs and have sometimes recommended that states deny COPA applications. That said, the policy paper acknowledged that there may be circumstances where a regulatory approach that restricts competition may be appropriate to implement important public policy goals. The FTC asserted, however, that it sees the current evidence as not supporting such an approach.

If you are considering applying for a COPA, there are factors to consider that can help mitigate potential negative attention from the FTC. These factors include evidence that facilities will not close, particularly in rural or underserved areas, access to key services will be maintained if not improved, any price increases will be consistent with those in other competitive markets and quality metrics and the health outcomes of patients will improve. Evidence of post-collaboration plans that verify cost savings through integration and operations will be important. In addition, providers considering a COPA application should consider impacts on local employment.

The FTC invited state legislators to engage with it in addressing problems with consolidation and avoiding the use of COPAs. We expect the FTC to continue its advocacy and perhaps be even more active in lobbying states not to adopt new COPAs or to adopt new applications under existing COPAs.

Foley is here to help you address the short-term and long-term impacts in the wake of regulatory change. We have the resources to help you navigate these and other important legal considerations related to business operations and industry-specific issues. Please contact the authors, your Foley relationship partner, or our Healthcare Practice Group with any questions.

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