COPA-Like Agreements in Pennsylvania and COPA Rules in Neighboring States

In the first part of this article, we discussed the Federal Trade Commission’s (“FTC”) recently issued staff policy paper strongly urging states to avoid using Certificates of Public Advantage (“COPA”) which seek to immunize health system mergers that might otherwise violate federal antitrust law. This second part discusses some COPA-like agreements in Pennsylvania involving federal and state regulatory agencies and health systems seeking to merge as well as a brief discussion concerning COPA rules in neighboring states.

Pennsylvania

Pennsylvania is not a COPA state. However, on several occasions in the past the Pennsylvania Attorney General (“AG”) and/or the U.S. Department of Justice (“DOJ”) in settlement of litigation seeking to block hospital mergers or consolidations have entered into agreements (akin to COPAs) with the parties pursuant to which the merger/consolidation is allowed to proceed but extensive conditions and requirements relating to conduct and operations are imposed on the parties designed to reduce the likelihood of anti-competitive conduct while seeking to assure that the asserted pro-competitive benefits are realized.

Geisinger – Bloomsburg

In 2012, the AG sued to block Geisinger Health System’s acquisition of Bloomsburg Hospital alleging that the acquisition would among other things violate Section 7 of the Clayton Act.

In settlement of that suit and based on Bloomsburg’s financial condition and the possible loss of 900 jobs, the AG allowed the acquisition to proceed based on Geisinger agreeing, among other things, to maintain Bloomsburg Hospital as an acute care hospital and to engage in certain contracting practices with health plans and not engage in others, to not prohibit physicians holding privileges at Bloomsburg from holding privileges at other hospitals, to maintain an open medical staff and to grant the AG specified oversight and enforcement rights,. The agreement was for a term of eight years.

The Williamsport Hospitals

In an earlier case, the AG sued to stop the merger of Providence Health System (Divine Providence and Muncy Valley Hospitals) with North Central Pennsylvania Health System (Williamsport Hospital) both based in Williamsport where there were no other hospitals.

The AG allowed the transaction to proceed in exchange for the parties agreeing to an array of requirements relating to both conduct and performance.

In this instance, in addition to imposing on the parties various covenants concerning contracting with health plans, employment of physicians and open medical staff, the AG required the parties (in accordance with their promised plans to reconfigure and consolidate services, increase efficiencies and reduce the costs of delivering services) to achieve specified amounts of cost savings and then pass them on to consumers or other purchasers of health care services in the form of low-cost or no-cost services to the community, or by reducing prices or by limiting actual price increases for existing services.

In this instance the term of the agreement was for 10 years and again the AG had extensive rights to review and enforce performance.

Geisinger – Evangelical Community Hospital

In August 2020, the DOJ filed suit challenging agreements that included Geisinger’s bid to acquire 30% ownership of Evangelical Community Hospital and other potentially anticompetitive conduct involving “significant entanglements” between the two parties. The complaint alleged that the two entities were close competitors for inpatient general acute care services in a six-county region in central Pennsylvania, and the transaction was likely to substantially lessen competition.

In March 2021, the parties reached a settlement agreement in which Geisinger agreed to reduce and limit any future ownership interest of Evangelical to a cap of 7.5%. Additionally, among other settlement terms, Geisinger was restricted from making any loan or line of credit associated with Evangelical, and from being involved in any decision-making in management or leadership positions at Evangelical. Finally, the parties also agreed to implement an antitrust compliance program.

Interestingly, in several other merger cases, there have been no similar COPA-style settlement agreements and the AG has instead been involved with the FTC in seeking to block mergers that they viewed as violating antitrust law. These include the proposed Penn State-Hershey merger which the parties called off and the Jefferson Health-Einstein Healthcare Network merger that was consummated following its being approved by the U.S. District Court notwithstanding the objection of the AG and the FTC.

Neighboring States

Also of note, neighboring New York State does have a COPA law and a process for providers to apply for a COPA for their collaborative arrangements such as mergers and clinical integration agreements and to immunize themselves from federal antitrust laws. Ohio and West Virginia also have COPA statutes.

By way of example, pursuant to applicable regulations in New York, a COPAs are issued by the Department of Health signifying the approval of a cooperative agreement or planning process, subject to certain conditions being satisfied. Parties that have received a COPA are provided state action immunity under federal antitrust laws and immunity from private claims under state antitrust laws and may negotiate, enter into and conduct business pursuant to the COPA. By way of example, this past July, the State University of New York Upstate Medical University and Crouse Health System who have historically been active competitors announced they would seek a COPA for their proposed merger.