Two rival hospitals in Terre Haute, Indiana, pulled back their merger application Monday, just days before the state was due to rule on the deal amid growing backlash to such medical monopolies.

The proposed merger between Union Health and Terre Haute Regional Hospital, the only acute care hospitals in Vigo County, Indiana, would have left Terre Haute’s 58,000 residents and those in the surrounding region with a single hospital operator. Although federal laws prohibit monopolies, the hospitals sought the merger under a state provision known as a “Certificate of Public Advantage” law, or COPA.

“Recognizing the COPA process is a very complex, innovative approach to improving access and quality health care for area residents, we believe it is best to withdraw the current application,” Union Health said in a statement posted on its website.

Union said it plans to submit a new application after working with Indiana regulators to “ensure the benefits” such as “improved access, quality” are included.

The withdrawal came nine days before a Dec. 4 deadline for state regulators to rule on whether to OK the merger. In recent months, the state health agency had received a deluge of public comments from residents and the Federal Trade Commission opposed to the deal between Union Health, a nonprofit whose main hospital is licensed as a 341-bed facility, and the 278-bed Terre Haute Regional Hospital, owned by for-profit chain HCA Healthcare. The commenters cited concerns about longer travel times to get emergency care, higher prices, and fewer choices.

Union Health and HCA declined to answer questions about what prompted the decision to pull back the application.

“There could be any number of reasons why they pulled the application with the stated intention to refile,” said Christopher Garmon, a University of Missouri-Kansas City economist who has studied COPA mergers. Given the status of the application, he said, it’s unlikely the deal was headed toward an approval. “Either way, I think it’s clear that the state was not ready to approve the COPA with conditions similar to past COPAs.”

It was the latest setback against mergers under COPA laws. Indiana and 18 other states have such laws that shield hospital mergers from federal enforcement by the Federal Trade Commission.

As a condition of the deals, states typically agree to monitor hospital performance and quality while limiting price hikes. Supporters of COPAs argue that state oversight built into the agreements can mitigate the harms of a monopoly. But health economists and the FTC have said that oversight cannot replace competition and that these mergers ultimately harm patients.

“We know that COPAs generally benefit the merging hospitals, but not local residents,” said Zack Cooper, a health economist and associate professor at Yale University.

His analysis of the Terre Haute deal suggested that it would have damaged the local economy and squeezed residents’ wallets. Cooper said he hopes that states faced with similar merger decisions will see Indiana’s waylaid case and the pushback against other COPA mergers as a cause for pause.

In comments to Indiana regulators, the FTC said COPAs “have proven unwieldy,” are “difficult to manage,” and “have failed to protect local communities from the harmful effects of anticompetitive hospital mergers.”

In 2018, Ballad Health formed as the nation’s largest state-approved hospital monopoly, with COPA agreements in Virginia and Tennessee. Since then, KFF Health News has reported, Ballad has fallen short on meeting quality and charity care goals, according to annual reports from Ballad and the Tennessee Department of Health. After years of complaints from patients, the state is now trying to hold Ballad more accountable for its quality of care.

Ballad Health has said that “the most important thing to our patients is the quality of care they receive” and that its system is rebounding after hospital quality slipped due to the pressure of the coronavirus pandemic.

Problems have also occurred when a COPA — and its oversight — are removed, leaving the merged hospital system as an “unregulated monopoly.” After North Carolina repealed its COPA in 2015, a subsidiary of HCA Healthcare bought Mission Health, a COPA-created monopoly in Asheville, for $1.5 billion in 2019. The monopoly in Asheville remained, but none of the COPA’s conditions applied to the new owner.

Last year, government inspectors found “deficiencies” at Mission Health that contributed to four patient deaths and posed an “immediate jeopardy” to patients’ health and safety, according to the 384-page federal inspection report. HCA has said it promptly addressed the issues. But the state and the hospital system are now engaged in a lawsuit.

Four states besides North Carolina — Maine, Minnesota, Montana, and North Dakota — have repealed COPA laws. Maine ended its law last year amid warnings from the FTC regarding such mergers.

Bill Montejo, a director at Maine’s Department of Health and Human Services, pointed to an FTC study as he urged lawmakers on a health committee last year to repeal its COPA law due to “the growing concerns about the ineffectiveness and potential negative effects of COPAs.”

The Union-Regional merger was years in the making. In 2021, Union Health leaders were instrumental in the passage of Indiana’s COPA law. They supplied draft language for the bill to one of the bill’s authors, according to legislative testimony, and Union Health CEO Steve Holman testified before lawmakers that the merger would improve the county’s poor public health rankings.

In 2023, Union Health and Regional had signed an agreement to merge, beginning the COPA application process.

Union faces a July 1, 2026, deadline to refile an application, according to Indiana’s COPA law.

©2024 KFF Health News. Distributed by Tribune Content Agency, LLC.