The Federal Trade Commission (FTC) is again urging Indiana regulators to block a hospital merger application, warning that a second iteration of the proposed deal still poses “serious harm to competition and consumers.”
The regulator also downplayed the parties' argument that one of the hospitals was under financial strain and could be weighing service line closures or other reductions in care.
In 2023, nonprofit Union Health, which includes the 341-bed Union Hospital, sought to purchase the 278-bed Terre Haute Regional Hospital, which is owned by for-profit hospital chain HCA Healthcare. The two facilities are located approximately five miles from each other in the small city of Terre Haute, Indiana, and are the only two acute care hospitals in Vigo County.
To close the deal, the hospitals filed for a certificate of public advantage (COPA), essentially an exemption to state antitrust law given in exchange for quality or competition assurances from the merging parties. COPAs are currently permitted in 19 states but are broadly discouraged by the FTC, which has argued they fuel hospital consolidation and limit competition.
Following pushback from the FTC as well as local groups—which voiced concerns about costs and care quality, and noted that both hospitals appeared to be financially stable—the hospitals voluntarily withdrew their bid in November just days ahead of the Indiana Department of Health’s ruling on the COPA application. The FTC celebrated the withdrawal as “good news for patients and healthcare workers.”
The effort to merge has since been revived, with the hospitals submitting a second COPA application in February.
In it, the organizations again argued their case that “there is clear evidence that the merger would benefit the population’s health outcomes, healthcare access and quality of care” and outlined various commitments they said would “outweigh any disadvantages attributable to a reduction in competition."
The second COPA application also pointed to "significant operational challenges” HCA’s Regional Hospital has faced in recent years. Unlike Union Hospital, Regional Hospital doesn’t have a primary care referral base and has seen patient volume declines that forced service line closures and limited its inpatient market share.
“Without the merger, Regional Hospital expects its operational challenges to lead to further service line reductions,” the hospitals wrote in the application. “Union Hospital, Regional Hospital and community leaders believe that the merger is the only model that will allow the community to achieve the goals set forth in the Community Plan and preserve access to a high-quality and cost-effective health system long-term.”
In a Monday release and letter to the Indiana Department of Health (PDF), FTC staff—now under the lead of a new commissioner—wrote that “despite their repackaging, the parties’ second application is effectively not so different than the original.”
The agency wrote that, “at first glance,” 45 commitments outlined by the hospitals in the second application, intended to mitigate competitive harms, “may appear to be a significant development,” but that a closer analysis shows that many are “merely repackaged content from the original application.” Those that are truly new “are largely aspirational,” FTC staff wrote, and all 45 commitments “suffer from questionable enforceability.”
The commission also took issue with the hospitals’ claims that Regional Hospital is in financial dire straits. Citing financial documents, the FTC wrote that the hospital was profitable and financially stable from 2018 to 2023 and had particularly high net income compared to peers from 2018 to 2021. The FTC also pointed to comments from Union Health’s CEO made to legislators in 2021 predicting that Regional Hospital would not exit the market without a merger.
More broadly, the FTC’s letter outlined historical precedent that merging hospitals that cite a potential closure to counter antitrust scrutiny “are nearly always proven false.” It also pushed back on recent complaints from Union Health’s CEO that the Indiana merger should not be compared to that of Ballad Health, which in 2018 required COPAs in Tennessee and Virginia and has since faced criticism for failing to meet quality standards outlined in the COPAs.
“The Indiana Department of Health should deny this attempt by Vigo County’s only two hospitals to eliminate competition and avoid antitrust review,” Clarke Edwards, acting director of the FTC’s Office of Policy Planning, said in a release.
The FTC’s commissioners voted 4-0 in support of the letter opposing the hospital merger.
Indiana lawmakers have been considering a repeal of the law permitting COPAs but amended that package to permit applications submitted before Feb. 15, effectively giving Union Health and Regional Hospital’s second bid a pass. A handful of other states that had COPA laws in place—Maine, Minnesota, Montana, North Carolina and North Dakota—have repealed those laws in recent years, and a bill has been introduced in Tennessee this year to do the same.
The state regulator’s decision on the COPA application is due by June 21.