United States: FTC Stands Down In Latest Head-To-Head Battle Between Federal And State Oversight Of Healthcare Collaborations

In what will undoubtedly be seen by all interested parties as a significant setback in the Federal Trade Commission's active opposition to potentially anticompetitive healthcare collaborations, the FTC voted unanimously on Wednesday to dismiss its challenge to Cabell Huntington Hospital's acquisition of St. Mary's Medical Center – two hospitals serving patients in the Huntington area of West Virginia.  While the FTC continues to believe that the merger will result in significant anticompetitive harm, it chose to abandon the fight in light of the recent passage of West Virginia Senate Bill 597 (SB 597).

The FTC first challenged the Cabell-St. Mary's merger late last year.  Although the proposed merger had already been approved by the West Virginia Attorney General after the two hospitals agreed to limit anticompetitive behavior, the FTC nevertheless challenged the acquisition.  The FTC alleged that the two hospitals – the only two in Huntington, West Virginia – were each other's closest competitors with respect to general acute care inpatient hospital and outpatient surgical services, and that the acquisition would result in a dominant firm with greater than 75% market share.  The FTC further alleged that the potential cost savings and purported quality improvements of the proposed acquisition were speculative, not merger-specific, and insufficient to outweigh the likely competitive harms of higher prices and lower quality of care.

In the midst of the FTC's challenge, West Virginia signed into law SB 597 in March of this year.  SB 597 calls for the newly-constituted West Virginia Health Care Authority (the Authority) to be the sole decision-maker to approve or reject proposed "cooperative agreements" among healthcare providers, thus shielding them from federal (and state) antitrust scrutiny.

SB 597 represents West Virginia's implementation of the doctrine of state action immunity.  State action immunity is typically an affirmative defense to an antitrust suit which requires its proponents to demonstrate both "clear articulation" of a state's desire to suspend competition and "active supervision" by the state of the conduct to be immunized such that any restraint on competition is a result of knowing, deliberate state intervention rather than simply an agreement among private parties.  With respect to "active supervision" (which historically has been the more difficult requirement to satisfy), SB 597 includes detailed provisions setting forth the Authority's supervisory role, including, at a minimum: (a) submission of annual reports by parties to a cooperative agreement to the Authority which include detailed information as to efficiencies achieved; price, cost, quality, and access to care; and reimbursement contracts with  insurers; (b) a corrective action plan where average performance falls below national averages; (c) the Authority's ability to order rebates if price increases are significant and unjustified; (d) the Authority's ability to otherwise investigate compliance; and (e) the Authority's ability to take other appropriate action to ensure compliance.

The newly-minted state law also appears to be a direct response to the FTC's challenge of the Cabell-St. Mary's merger.  State Senator Plymale (D) who introduced SB 597 (and represents the same county in which the two hospitals are located) argued that the decision of whether these hospitals should be allowed to merge should be decided in West Virginia, not Washington: "We better understand access, service, and regulation that affect the unique challenges of our citizens."  Upon the bill's passage, the Authority predictably approved Cabell's cooperative agreement with St. Mary's, joining the West Virginia Attorney General's prior approval of the merger.

In a strongly-worded statement accompanying the FTC's dismissal of its challenge on Wednesday, the FTC declared that "[t]his case presents another example of healthcare providers attempting to use state legislation to shield potentially anticompetitive combinations from antitrust enforcement."  The FTC argued that state cooperative agreement laws such as SB 597 undervalue the critical role that competition plays in the healthcare sector, and warned that such state laws are likely to harm healthcare consumers through higher prices and lower quality of care.

The FTC once again also refuted counterarguments that antitrust enforcement undermines the policy goals of the Affordable Care Act (ACA) to lower costs and improve care through greater coordination.  The FTC reiterated that the ACA neither sets aside the antitrust laws nor encourages mergers that substantially lessen competition.  Moreover, while the FTC has always recognized that mergers may often result in procompetitive efficiencies, any claimed benefits must be "merger-specific" (i.e., not achievable short of a merger) to be legally cognizable.  And, as a general matter, many purported benefits of healthcare mergers – "including coordination of patient care, sharing information through electronic medical records, population health management, risk-based contracting, standardizing care, and joint purchasing" – often can be achieved through means short of mergers that do not harm competition.

The FTC ended its statement by reemphasizing its continued commitment to "vigorously" investigating and challenging anticompetitive healthcare mergers.  It also warned that its decision to abandon the fight against the Cabell-St. Mary's merger "does not necessarily mean that we will do the same in other cases in which a cooperative agreement is sought or approved."  Indeed, the FTC has in the past actively opposed efforts by states to extend antitrust immunity to certain healthcare collaborations under the cloak of state approval and supervision. The FTC has also enjoyed considerable success in narrowly confining the state action immunity doctrine, including its most recent Supreme Court victories in North Carolina State Board of Dental Examiners v. FTC, 135 S. Ct. 1101 (2015) and FTC v. Phoebe Putney Health System, Inc., 133 S. Ct. 1013 (2013).  Given this, the FTC's sudden change of heart with respect to SB 597 in particular may perhaps be surprising to the healthcare sector.  It apparently constitutes tacit acknowledgement by the FTC that the regulatory regime established by SB 597 meets the requirements of state action immunity, including the requirement of active supervision.

The healthcare sector will surely monitor the situation closely to see if other states use West Virginia's statute as a blueprint for shielding their in-state healthcare providers from antitrust scrutiny, and if so, whether the FTC will once again back down in the face of state action or be forced to draw a line in the sand against further erosion of its healthcare antitrust enforcement authority.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
24 Oct 2017, Seminar, Los Angeles, United States

Presented by The American Bar Association White Collar Crime Committee.

24 Oct 2017, Conference, Los Angeles, United States

Corporate transactions are not just in the domain of M&A corporate attorneys. This program will cover the important role of employment and benefits counsel in shaping mergers and acquisitions. The presenters will provide practical guidance on conducting due diligence of labor, employment, employee benefits and executive compensation arrangements of target companies.

25 Oct 2017, Business Breakfast, New York, United States

Please join us for a complimentary breakfast program and networking with private equity investment banking professionals to discuss private equity activity and prospective deal flow opportunities in the technology industry.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.