The FTC dismissed its antitrust complaint against a proposed West Virginia hospital merger in a 3-0 vote in light of a recent West Virginia law immunizing hospitals from antitrust scrutiny.  “Our decision to dismiss this complaint without prejudice does not necessarily mean that we will do the same in other cases in which a cooperative agreement is sought or approved,” the FTC said in a statement issued on Wednesday, July 6, 2016.

Cabell Huntington Hospital announced its intention to acquire St. Mary’s Medical Center in November 2014, and, on July 30, 2015, the presidents of each hospital and West Virginia’s Attorney General entered into an Assurance of Voluntary Compliance agreement, wherein the hospitals agreed to certain conditions and obtained the Attorney General’s approval of the proposed merger. 

The FTC filed an administrative complaint challenging the proposed acquisition shortly thereafter, in November 2015.  According to the complaint, the hospitals are three miles apart and the only direct competitors in the Huntington, West Virginia, community.  The FTC alleged that the proposed merger would likely reduce competition in the area, lead to increased healthcare costs, and result in “a dominate firm with a near monopoly” over certain hospital services. 

On March 18, 2016, West Virginia passed S.B. 597, which exempts healthcare providers from federal antitrust liability as long as the providers act under the jurisdiction of the West Virginia Health Care Authority and comply with the Authority’s regulations and administrative decisions, which include cooperative agreements approved and directed by the Authority.  Prior to the bill’s passage, Delegate Mike Pushkin reached out to the FTC for staff comment on S.B. 597.  The FTC responded unfavorably, observing that the legislation would likely foster anticompetitive conduct “inconsistent with federal antitrust law and policy.”

Despite dropping its challenge to the merger last Wednesday, the FTC continued to express serious concerns about the newly passed law and cooperative agreements, more generally.  According to the FTC, “This case presents another example of healthcare providers attempting to use state legislation to shield potentially anticompetitive combinations from antitrust enforcement.  The Commission believes that state cooperative agreement laws such as S.B. 597 are likely to harm communities through higher healthcare prices and lower healthcare quality.”