FTC Staff Opposes State Legislation in North Carolina Designed to Shield UNC Health System from Antitrust Enforcement

In a comment to North Carolina House Health Committee members, the Federal Trade Commission staff opposed a bill pending before the state legislature attempting to prevent antitrust authorities from challenging the University of North Carolina Health Care System for engaging in anticompetitive mergers and conduct.

According to the staff comment, North Carolina Senate Bill 743 would authorize the kinds of acquisitions, market allocation, information sharing, and joint contract negotiations that reduce competition among healthcare providers and lead to patient harm in the form of higher healthcare costs, lower quality, reduced innovation, and reduced access to care, as well as depressed wages for hospital employees.

Senate Bill 743 (S-743) was unanimously passed by the North Carolina State Senate on May 1, 2023 and is now pending before the North Carolina House. It includes a provision purporting to give UNC Health (as well as any private and public entities with which it collaborates) a defense from antitrust enforcement for otherwise unlawful mergers or coordinated activity under the state action legal doctrine. Staff takes no position on whether S-743 satisfies state action requirements, noting in the comment that this would require further investigation.  

The FTC has raised concerns about similar legislation in other states that purport to confer broad antitrust defenses to public health entities. In the case of S-743, UNC Health does not need state action protection to engage in beneficial collaborative activities because antitrust laws already permit competitively neutral collaborations among healthcare providers that benefit patients, the comment points out.

The FTC is concerned about the increasing use of state legislation to exempt hospital consolidation that harms patients and workers from law enforcement. The FTC’s recent policy work in this area suggests many reasons to be skeptical that state action protection for such arrangements deliver the benefits promised by the hospitals.

The Commission vote to submit the staff comment to the North Carolina House representatives was 3-0.

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