C&BP Seeks FTC Investigation Of Proposed Sentara-Cone Health Merger

2021-05-7

Sentara Healthcare uses state’s Certificate of Public Need process to block competitors, while separate lawsuit asserts unfair business practices.

Checks and Balances Project (C&BP) has filed a request with the Federal Trade Commission seeking an investigation into the proposed merger between Sentara Healthcare and Cone Health of North Carolina. The request highlights examples of anti-competitive behavior by Sentara, particularly its use of Virginia’s Certificate of Public Need (COPN) process to block competitors from developing services in which Sentara dominates the southeastern Virginia market.

The FTC needs to investigate the proposed merger, C&BP wrote, because Sentara has succeeded in using the COPN process to weaken its remaining competitors in the Hampton Roads area – Bon Secours and Chesapeake Regional Medical Center (CRMC).

In one case highlighted by C&BP’s reporting, Sentara’s objections damaged Bon Secours’ attempts to restructure its hospitals in the area, leading to its decision in January to close the 165-year-old DePaul Medical Center. DePaul had the highest rate of charity care in the state.

Just last week, CRMC sued Sentara for tortious interference related to Sentara’s poaching of cardiologists from CRMC while Sentara also fought its COPN application to start an open-heart surgery unit.

In that fight, Sentara Healthcare was granted legal standing by the Virginia health commissioner to fight CRMC’s application. CRMC’s objection to Sentara’s status was denied in a ruling by Norfolk Circuit Court Chief Judge Mary Jane Hall, who had previously represented Sentara in a long-running case to get a permit to start a liver-transplant unit.

In that earlier case, Hall pleaded Sentara’s case with Jamie Martin, who is now Sentara’s chief outside counsel. Neither Hall nor Martin disclosed that relationship to CRMC or its attorneys. Hall did not rescues herself from hearing the case.

Finally, C&BP noted in its request for an investigation that Martin had served as a legal advisor to a 2015 state commission investigating the COPN process without disclosing her long ties to Sentara. The commission report includes recommendations by Martin that would have benefited Sentara’s business.

More than 30 years of FTC objections

For more than 30 years and through the administrations of six presidents of opposing political parties, the FTC has criticized certificate of need laws (CON, another name for Certificate of Public Need, or COPN) as anti-competitive and ineffective in slowing the rise in health care costs.

Reagan FTC, 1987: COPN law is “unlikely to benefit health care consumers in Virginia.”
Bush FTC, 1989: The “empirical evidence suggests that CON regulation does not help control the costs of health care.”
Clinton FTC, 1998: Missouri’s certificate of need law was too cumbersome to allow the development of competing health care providers.
Bush FTC, 2005: “Incumbents” such as Sentara,“can too easily use CON procedures to forestall competitors from entering an incumbent’s market.”
Obama FTC, 2015: “CON laws can be prone to exploitation by incumbent firms seeking to thwart or delay entry by new competitors.”
Trump FTC, 2019: Weighed in on states’ efforts to repeal CON laws, including in 2019 when it told Alaska legislators that the laws “limit consumer choice and stifle innovation.”

Sentara’s expansion plans

We’ve reported on how Bon Secours, DePaul’s parent company, was stymied in its efforts to restructure some of the hospital’s operations and add new services by Sentara Healthcare, which used Virginia’s laws to block Bon Secours’ proposals.

Sentara registered with the IRS as a tax-exempt nonprofit charity but has net assets of $6 billion. We’ve been probing how the healthcare giant that’s seeking to expand into North Carolina uses lobbying and influence to crush competitors, the lengths it goes to do that and the impact on average citizens.

Ray Locker is enterprise and investigative editor of Checks and Balances Project, an investigative watchdog blog holding government officials, lobbyists, and corporate management accountable to the public. Funding for C&BP is provided by Renew American Prosperity and individual donors.