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Tuesday, May 28, 2024

FTC criticizes N.C. bill to enable UNC Health expansion deals

Federal regulators have criticized the N.C. Senate’s attempt to carve out an exemption from antitrust laws for UNC Health, East Carolina University’s medical school and any private-sector providers they collaborate with.

The staff of three key offices of the Federal Trade Commission — with permission from three of the FTC’s sitting commissioners — issued a letter on Monday to warn that they see the provisions of Senate Bill 743 as unnecessary and anti-competitive.

Regulators are “concerned that S743 may encourage UNC Health to engage in the kinds of acquisitions and collaborations that would harm patients, employers and workers,” the letter said.

Moreover, the bill fails to reckon with “a significant and growing body of empirical economic research showing that increased consolidation and certain kinds of coordination among health care providers increase the risk of higher prices without any improvements in quality,” it said.

The letter may not block passage, as the Senate has incorporated the term of S743 into its version of the fiscal 2023-25 budget bill, while extending it to also cover the ECU med school. Senate leaders have made it clear S743 is a centerpiece of their health care strategy.

“Those two hospitals have a mission that is different than other hospitals in the state,” Senate President Pro Tem Phil Berger said in late May. “They basically are state actors. They are part of our university system. It’s our belief, because they’re going to be called upon as the hospital or health care provider of last resort, so to speak, they need to some ability to function as that last resort in ways that the others would not need.”

Berger also said he doesn’t see encouraging further consolidation of the health care system “as being an intentional push on behalf of the Senate at this point.”

The letter noted that UNC Health has a track record of anti-competitive behavior, a reference to its collusion on faculty hiring with Duke University that was upended by a class-action lawsuit supported by the U.S. Department of Justice.

FTC officials also said the General Assembly fueled consolidation and price increases in the health care sector, citing the old “certificate of public advantage” (COPA) law that allowed Memorial Mission Hospital and St. Joseph’s Hospital in Asheville to merge without facing antitrust enforcement.

The FTC uses that mid-1990s merger as a case study of what can go wrong with such laws, as Mission Health post-merger raised prices by at least 20% more than peer hospitals. Legislators repealed the COPA law in 2015, clearing the way for a February 2019 buyout of Mission Health by for-profit HCA Healthcare.

Stakeholders like the State Employees Association of North Carolina have since argued that HCA “has been able to exercise its market power to the detriment” of patients and workers, Monday’s FTC letter said. Officials of Nashville, Tennessee-based HCA, the nation’s largest hospital operator, say quality of care has improved under its ownership.

The FTC letter was addressed to Rep. Larry Potts, R-Davidson, who chairs the House Health committee, and S743 co-sponsors Sen. Ralph Hise, R-Mitchell, and Joyce Krawiec, R-Forsyth.

The central feature of Senate’s attempt at setting up an antitrust exemption is its labeling as “state action” any dealmaking by UNC Health and the ECU med school. The FTC doesn’t necessarily agree that UNC Health legally qualifies as an arm of the state or whether the bill satisfies U.S. Supreme Court doctrine on the point. “Both are fact-intensive inquiries that would require further investigation,” it said.

Asked about the letter, Berger said he would like to read it. “I suspect we will disagree with their opinion on that,” he said.

The Senate’s approach to health care is to “find ways to increase the supply of facilities and the supply of personnel to treat people,” he said. “To the extent there’s a market available in health care, [that] should have the effect of a downward pressure on cost.”

UNC Health spokesman Alan Wolf said for the system to “continue fulfilling its mission as the state’s health system, especially in terms of serving rural areas, the statute needs to be modernized to ensure that UNC Health has the ability to adapt to today’s rapidly evolving health-care world.”

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