FTC in midst of 30-day Ballad Health merger review

Zach Vance • Updated Nov 17, 2017 at 11:35 PM

The Federal Trade Commission’s role in the merger of Mountain States Health Alliance and Wellmont Health System isn’t quite over yet.

On Friday morning, hospital executives Alan Levine and Bart Hove disclosed that the FTC is conducting a 30-day review of the merger’s terms and conditions in Virginia and Tennessee.

Tennessee granted a Certificate of Public Advantage in September and Virginia approved a Cooperative Agreement in October, both effectively giving the merger state-action antitrust immunity.

“Early on the process, (the FTC) issued subpoenas, or requests for information, which we complied with. But, we reached an agreement with them that we would not close for 30 days after the states approved the (Certificate of Public Advantage and Cooperative Agreement),” Levine said.

A Mountain States spokeswoman confirmed the review will be completed Nov. 29 — Virginia’s approval came on Oct. 30.

FTC spokeswoman Betsy Lordan confirmed the cordial review, but she could not comment on “ongoing investigations.”

“(The) Commission is still reviewing the transaction, and any further information (including the details about the timing) would need to come from the parties if they choose to disclose it,” Lordan wrote in an email to the Johnson City Press.

Levine said the full Federal Trade Commission has yet to take a position on the merger, but staff members representing the FTC’s mergers division certainly have: Dating back to December 2015, FTC staff members have testified or submitted public comment eight times opposing the merger.

FTC staff often warned about a lack of competition driving up prices and casting concerns about a COPA improving pricing and health, but through all those instances, no data was presented showing a COPA would cause adverse effects.

Levine said that’s because there is none, and to prove his point, he pointed to a Nov. 1 FTC public notice encouraging academic and industry research on the impact of COPAs.

“FTC staff is not aware of any empirical evidence demonstrating that COPA statutes and regulations produce better results for consumers than market-based competition, but recognizes that more empirical work on the impact of COPAs could provide benefits to policymakers considering these important issues,” the public notice stated.

Levine and Wellmont CEO Bart Hove seemed confident the FTC would ultimately bow out of challenging their merger, especially since it satisfied the “two-pronged test” established in the Parker v. Brown Supreme Court ruling.

The first test is having the state legislature, in this case two state legislatures, unanimously voting for an articulated policy that regulates the merger, and the second is having supervision over the merger, which both states have already created a framework for.

“The FTC is not a policy body. They have one job (and) it's to protect competition,” Levine said. “The state has a different job. The state has to focus on policy (like) what's best for the people in our state. The FTC can't wander into that. That's what state action immunity is.”

Levine said fierce competition between Mountain States and Wellmont created an inordinate amount of duplicative services in the region, such as having two Level 1 Trauma Centers in the Tri-Cities and no children’s trauma centers.

“The FTC right now, I think the process they're going through (is), ‘What is the likelihood of prevailing if we were to challenge it (in court)?’ I think that's one of the questions they probably need to ask themselves,” Levine said.

Another question is whether the FTC is prepared to challenge two attorneys general’s offices.

Citing a conversation he had with the Virginia health commissioner and a deputy attorney general, Levine said the attorney general’s office will defend the Department of Health’s approval of the merger.

"So you (would have) a situation where you've got a state health agency being defended by the attorney general's office against (the FTC). I don't think you'll find very many cases where the FTC is actually trying to challenge a state attorney general. Normally, they're acting together,” Ballad Health’s executive chairman said.

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