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Hospital Mergers: The Future of COPA Immunity

 |  November 4, 2022

By:  Carl Hittinger, Marc Schildkraut & Tyson Herrold (Antitrust Advocate)

In October 2022, the Federal Trade Commission issued a Public Comment opposing a Certificate of Public Advantage (COPA) for the merger of State University of New York Upstate Medical University (SUNY Upstate) and Crouse Health System, Inc. The FTC’s Public Comment advises the New York State Department of Health that the merger would harm competition, and more generally reflects the Commission’s continued hostility to COPAs. So what are COPAs, and why is the FTC so critical of them?

Parker Immunity and New York’s COPA Statute

The antitrust laws apply broadly. Section 7 of the Clayton Act, for example, appears at first glance to bar all mergers that may “substantially lessen competition.” However, in 1943 the Supreme Court in Parker v. Brown found “nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature.” Thirty-seven years later, the Supreme Court in California Retail Liquor Dealers Association v. Midcal Aluminum clarified that even conduct by private parties is immune from antitrust liability so long as the challenged conduct is pursuant to “clearly articulated and affirmatively expressed … state policy” and is “actively supervised” by the state.

Therein lies the purpose of state COPA statutes: as the FTC puts it, “to replace marketplace competition among hospitals with state oversight.” New York’s COPA statute is no exception. It aims to “promote improved quality and efficiency of, and access to, health care services” by “encourag[ing] … mergers and acquisitions among health care providers … under the active supervision of the commissioner.” New York’s COPA regulations leave no doubt about antitrust immunity: “Parties that have received a certificate of public advantage … shall be provided state action immunity under Federal antitrust laws and immunity from private claims under state antitrust laws.” Relevant factors in issuing a COPA include: (i) the “financial condition of the parties to the cooperative agreement, including whether any health care provider party is experiencing financial distress,” (ii) “the level of competition in the primary service area,” (iii) “difficulties in recruiting and retaining health care professionals,” and (iv) the general pro- and anti-competitive effects of the merger. These factors, among others, are considered in the context of active supervision by state regulators…