Upstate-Crouse merger needs more scrutiny, not less | Opinion

August 31, 2022 HealthcareState and Local Policy

The proposed merger that SUNY Upstate and Crouse have been trying to quietly push through should concern everyone in the Syracuse community, as well as every other New Yorker around the state. The deal — forged in secrecy, without local residents or journalists receiving much insight into what the marriage of these two facilities would mean — would likely be very damaging to the level of care available to the Syracuse community. And an under-the-radar regulatory tool the hospitals are trying to employ would set a dangerous precedent for future hospital mergers all across the state.

New York regulators and lawmakers should not only reject this deal, but repeal the underlying legislation that could make it so damaging.

Merging Upstate and Crouse would reduce the number of hospital systems in Syracuse to two, with the combined Upstate/Crouse entity controlling about 71% of the market. But research shows that hospital consolidation such as this drives up prices and drives down health outcomes, as hospitals exploit the lack of competition to make more money and spend fewer dollars on care.

More worrying, Upstate and Crouse are applying for what’s known as a certificate of public advantage, or COPA for short. If granted, it would give the new hospital system even more power to harm patients and drive up costs in the local community.

COPA laws, which exist in 17 states, including New York, shield hospitals that want to merge from federal antitrust scrutiny, which could prevent harmful mergers, in exchange for affirmative regulation at the state level, including the use of price controls. Nine states have approved hospital mergers under these laws. Approving a COPA for Upstate and Crouse would be New York’s first foray into using this form of regulation since its law was approved in 2014.

Forgoing federal antitrust scrutiny for more direct state regulatory control may sound OK in theory, but in practice it hasn’t gone well in the places that have tried it.

In fact, the Federal Trade Commission released a report on Aug. 15 outlining just how bad COPAs have been where they’ve been applied. “Despite hospital claims that COPAs will result in lower costs and improved population health outcomes, we are not aware of any proven benefits of COPAs,” said FTC Director of Policy Planning Elizabeth Wilkins.

Instead, the FTC’s report pointed to a host of bad outcomes at hospitals governed by COPAs: higher costs for patients, lower wages for staff, including nurses, and declines in the quality of care.

COPAs fail because of they’re a classic regulatory bait and switch. What usually happens is the merging hospitals argue for a COPA, instead of being subjected to merger scrutiny from the FTC, which has the potential to derail the merger entirely. After they’ve received a COPA agreement, they then turn right around and lobby state lawmakers and regulators to either eliminate the COPA or to make its requirements so weak as to be functionally meaningless.

The result is a hospital free from oversight from either federal or state regulators. For example, the FTC found that at the Mission Health System in North Carolina, costs increased by 25 percent while its COPA was in force, and then by 38 percent after the deal was allowed to expire.

It would be far better is for a damaging hospital merger to be blocked at the outset by the FTC or state antitrust enforcers. Employing a hard-to-enforce regulatory regime that is eventually allowed to wither or fall by the wayside just does not work.

Hospital monopolies are some of the most pernicious out there because their harms don’t just manifest as higher prices, lower wages, or reduced privacy, but in the midst of life-and-death events, literally making the community sicker as the hospital’s owners get richer.

So, a bleak future could be in store for Syracuse patients if Upstate and Crouse receive the COPA they seek.

New York regulators and antitrust enforcers should do what they can to block this deal, including working with the FTC, rather than facilitate it. And leaders in the statehouse should repeal the state’s COPA law, before any damage is done.