The Federal Trade Commission will hold its challenge of a West Virginia hospital merger while it examines a new state law that aims to protect the deal from federal antitrust scrutiny.
The FTC's order (PDF), issued Thursday, delays for 30 days administrative law proceedings over Cabell Huntington Hospital's proposed acquisition of St. Mary's Medical Center, also located in Huntington. A hearing before an administrative law judge had been scheduled for April 5.
The order follows the recent signing of a new West Virginia law designed to shield hospital mergers from state and federal antitrust review, assuming they get certain other state approvals. Some speculated the new law would cause the FTC to drop its challenge to the West Virginia merger all together, and that the new law could inspire more states to pass similar legislation.
“Withdrawing this matter from adjudication for a short period of time…will give us an opportunity to evaluate the impact, if any, of the state legislation without any adverse effects on competition or consumer interests,” according to the order.
The hospitals had asked an administrative law judge (PDF) earlier this month to hold off on the hearing for several reasons including the legislation. The FTC had argued (PDF), at the time, that the hearing should move forward, but that was before the legislation passed.
The FTC took action in November to block the merger, saying it would create a near monopoly over general acute care inpatient hospital services and outpatient surgical services that would likely lead to higher prices and lower quality. The two hospitals' leaders have said they believe the FTC challenge “misreads the highly competitive landscape” across their three-state market of Kentucky, Ohio and West Virginia. They say the merger would help their community.
Jeff Miles, an antitrust attorney with Ober Kaler, suspects the FTC will either now drop its challenge or take a wait-and-see-approach, watching how the state supervises the merger. Then it could decide whether that supervision immunizes the deal from antitrust action. States that want to protect healthcare deals from federal antitrust action must show they're actively supervising the conduct of merging hospitals, among other requirements.
Sen. Robert Plymale, one of the sponsors of the bill that led to the new law, said he believes the state has addressed the FTC's concerns over the merger, which would occur in the area he represents. He said the hospitals have already gained the necessary state approvals to be immunized from antitrust scrutiny under the new law. He believes the FTC too narrowly defined the geographic area in which the hospitals compete, and he believes the merger will lead to better health outcomes.
“These decisions need to be made in the state of West Virginia,” Plymale said. “We understand West Virginia a lot better than someone sitting in an office in Washington, D.C.”