Above: Janet Kleinfelter of the Tennessee Attorney General’s office and Scott Fowler, CEO of Holston Medical Group
By Jeff Keeling
Editor’s note: The July Business Journal’s print edition will feature a deeper dive on the FTC’s June 18 workshop on the impact of COPAs in healthcare markets. Bjournal.com will have the most comprehensive coverage once the July print edition is released.
Replacing health care competition with state-supervised regulation? Make that regulation strong, make it specific but flexible, watch for “evasion” on the part of the regulated system, and be prepared for the long haul and for political pressure.
Those themes were repeated during a day-long, Federal Trade Commission-organized “Health Check on COPAs” in Washington Tuesday. And throughout the day, the country’s largest and most complex Certificate of Public Advantage (COPA) – the one that allowed for the creation of Ballad Health and that the FTC strongly opposed – was center stage. State officials who helped oversee earlier, now-repealed COPAs in Montana and North Carolina spoke of positive experiences with rate regulation during the COPA periods but added that political pressure contributed to those COPAs’ repeal and that “regulatory evasion” should be expected.
“(Tennessee and Virginia) must define what a successful COPA looks like to them,” Erin Fuse Brown, a law professor whose September 2018 report on the Ballad COPA was published by the Milbank Foundation.
“They have to know and keep very clear at the forefront of their mind what this whole enterprise is setting out to do,” said Brown, who has published articles in leading journals covering hospital prices, medical billing, health care competition and consolidation, and consumer financial protection in health care. “Because it’s such a risky undertaking, the state has to really commit to remain vigilant not for 10 years, not for 20 years but forever … unless new competition enters the market. If you have a monopoly, you need a COPA.”
Brown spoke during a 90-minute session on Ballad (one of four sessions overall) that also included state officials from both Tennessee and Virginia, independent market participants in the Ballad footprint from the provider and the payor sectors, and an attorney representing Ballad.
Janet Kleinfelter of the Tennessee Attorney General’s office said Tennessee and Virginia have worked very hard to create strong regulation and that they plan to continue adapting it as needed. She said her office felt fortunate to be able to review other states’ COPA experiences.
“We’re the ones who have to implement it, we’re the ones who have to come up with the regulatory scheme, so what we attempted to do was to try and pick out the best things that we could as well as adding our own provisions,” she said.
Scott Fowler, CEO of Holston Medical Group headquartered in Kingsport, TN and a panelist, came out of the Ballad session determined to continue advocating with Tennessee and Virginia for strong regulation, but concerned that politics could blunt the regulators’ ability to be effective. Independent providers need fair access to data and a level playing field as health care models continue shifting from inpatient to outpatient and from fee for service to value-based.
Both those trends can benefit consumers most if some level of competition is preserved and patients receive high quality care in the least expensive setting, Fowler told the Business Journal. He said he sees signs that “Ballad can extend the monopoly vertically into all kinds of different pieces of the puzzle that fragments the ability to create collaborative models in the outpatient marketplace.”
Kleinfelter said the Tennessee COPA’s “Terms of Certification” (TOC) provide a strong basis for adaptation. She and Virginia Department of Health’s Joseph Hilbert noted the deep-rooted population health and economic challenges faced in the Ballad region impacted the COPA and said that it isn’t just about pricing.
Kleinfelter did, though, mention pending updates to a TOC Addendum that covers pricing regulation. And while Richard Cowart, an attorney representing Ballad, said he felt the current regulatory approach and analyses are more than sufficient to protect consumers, Kleinfelter countered, saying she also welcomed the FTC discussion and the opportunity for continued study and scrutiny.
“From our perspective … the more analysis, the more empirical data that we have as to the effectiveness of the COPA, and not just from a pricing perspective and not just from a quality perspective, but from how have we actually been able to improve the health of the population, how have we been able to create access to health care – all of the factors that are listed in the index by which we are testing this COPA – the more information that we have to help us go forward with the next application that we may see, we think is entirely beneficial.”
Preceding the Ballad session were two others. One featured economists from academia and the FTC presenting information on empirical studies of price and quality effects of earlier, smaller COPAs. Limited cost data used for the Montana study showed that the COPA regulation succeeded in keeping costs to consumers in line with peer hospitals until its 2007 repeal, and that prices rose faster than at those same peers in the following years.
The other session included state regulators from Montana and North Carolina reflecting on their experiences regulating COPAs granted to Benefis Health (Montana) and Mission Health (Asheville, NC).
Those regulators – Mark Callister, formerly of the Montana Department of Justice, and Kip Sturgis of the North Carolina DOJ – oversaw the Benefis and Mission COPAs. They said the oversight was difficult and often fraught with politics, with politics ultimately leading to the COPAs’ repeals over their objections.
“Ultimately Benefis resorted to politics to get the COPA regulation terminated, but … all the market players went to the political arena to get things done, and that’s a real problem in my view with the COPAs,” Callister said.
Brown said she believes “if anyone has done this well, Tennessee and Virginia have,” and that their COPA structure makes it possible to achieve cost constraints and good quality and access metrics. She offered a strong note of caution, though.
“The systems that Tennessee and Virginia have built, their indices, they really do touch on all of these dimensions – price, quality and access,” Brown said. “The main concern that I would have is how do we resist the incentives to maybe repeal the COPA oversight 20 or 30 years from now. How do we avoid what happened in North Carolina, in Montana (in the Ballad footprint)?”
Speaking with the Business Journal, HMG’s Fowler said he’ll continue advocating at the state level, “trying to create recognition of where the patients of our community might not be served under the current (regulations) or the current operations of the hospital. I don’t think people have bad motivations. I think people do what’s in their financial best interest.”
Fowler said the event’s discussions left him, “both encouraged and also recognizing that this has a huge political component to it. The ability to change things just means that there’s room for political influence to play a role. I like competition better than political influence, and I think Ballad has a tremendous advantage in political influence compared to really anybody else in the community.”