When the Federal Trade Commission sued in April to require the nonprofit Louisiana Children’s Medical Center and HCA Healthcare Inc. (HCA) to submit a formal merger filing for a transaction consummated in January, the agency wasn’t necessarily aiming to unwind the tie-up.

Rather, it sought to establish legal precedent that hospital mergers over the threshold for notification to Washington must alert the FTC about their agreement even when granted immunity from federal antitrust oversight.

The tussle has cast a spotlight on a little-known regulatory quirk: certificates of public advantage (COPAs) approved by states that allow hospitals to combine in concentrated markets without FTC review.

A victory for the hospitals could encourage more states to shield hospital mergers from Washington trustbusters. A legal defeat for the agency could hamper its wider effort to prevent consolidation that could leave patients with fewer medical options.

Two antitrust attorneys with healthcare experience, including a former FTC enforcer, told The Deal that the commission intervened primarily to strengthen its ability to oppose COPAs.

“If the FTC’s real goal is to investigate the transaction, and to sue to unwind the deal, I don’t think you need an HSR filing to do that,” said Alexis Gilman, partner at Crowell & Moring LLP, referring to the 1976 Hart-Scott-Rodino Act that requires mergers to be notified to Washington.

“That raises the question as to whether this is more about the principle of having parties make filings, and the precedent not being set that you can avoid filings if you get COPAs,” said Gilman, a former FTC staff attorney and assistant director of the Bureau of Competition.

The FTC has submitted lengthy oppositions to COPA applications in other states but missed its chance in Louisiana. “They wanted the opportunity to oppose this at the state level, but it seems like they didn’t even know this deal was happening until they read about it in the paper,” an antitrust lawyer quipped.

Had the parties shared merger paperwork with the FTC when they sought COPA protection, the agency could’ve gathered information to bolster a state filing contesting the application, the DC-based attorney explained. “Even if a transaction is exempt from federal antitrust scrutiny, the FTC at least wants to have the opportunity to kick the tires,” he said.

On Dec. 28, Louisiana Attorney General Jeff Landry approved a COPA that barred Washington from reviewing the $150 million transaction despite mergers valued at $111.4 million triggering mandatory filings in Washington.

In an April 23 court filing, Landry noted that the FTC never contacted his office or the Louisiana Department of Justice “to express any concern or issues” with the proposed COPA. The state argues that under doctrine rooted in a 1943 U.S. Supreme Court decision, transactions exempt from federal antitrust law don’t fall under HSR.

That month, the FTC asked a federal court in Washington to compel the parties to comply with the 1976 law, prompting the hospitals to countersue in Louisiana. The cases were consolidated before the U.S. District Court for the Eastern District of Louisiana.

As the drama unfolds, the FTC announced June 5 that it objects to state legislation in North Carolina designed to shield the nonprofit University of North Carolina Health Care System from federal antitrust scrutiny.

The agency warned that the pending bill, which proponents tout as beneficial to the state and struggling rural hospitals, would encourage UNC to pursue anticompetitive acquisitions that could harm patients, employers, and workers.