FTC Fails to Stop Two Health System Mergers

FTC Fails to Stop Two Health System Mergers

As more patients look for higher quality and lower costs, certain healthcare organizations suggest the solution may be found in merging facilities. Advocate Health Care and NorthShore University HealthSystem, both in the greater Chicago area, are looking to consolidate. Similarly, a merger is underway at Penn State Hershey Medical Center and PinnacleHealth System in the Harrisburg, PA area.  Both cases find themselves in court however, as the Federal Trade Commission (FTC) has filed antitrust lawsuits.

These circumstances signal a changing landscape among healthcare facilities. A judge denied the FTC’s motion for a preliminary injunction to temporarily halt the merger between the Harrisburg hospital chains in May and in another twist this month, the FTC’s injunction against the Illinois based facilities was also denied.  Some experts following the case advise these decisions will give hope to others in the industry as mergers and acquisitions trend upwards. Some industry watchers estimate that the healthcare industry saw mergers worth well over half a trillion dollars in 2015 when including pharmaceutical companies, medical device companies and health insurers.

Advocate – NorthShore Combined Metrics

NorthShore Advocate Combined
Hospitals 4 13 17
Physician Groups 3 27 30
Imaging Centers 17 52 69
Home Health Agencies 1 4 5
Hospices 1 2 3
Skilled Nursing Facilities 1 3 4
Surgery Centers 0 2 2
Staffed Beds 690 3,004 3,694
Net Patient Revenue $1.4 billion $3.9 billion $5.4 billion

Source: Definitive Healthcare

 

The NorthShore CEO suggests that a change in healthcare delivery is inevitable under the Affordable Care Act, and their case may set a precedent for future hospital mergers.  While arguments center around the percentage of the market a merged entity would monopolize, health economists and antitrust experts weigh in – namely on the side of the FTC in the Harrisburg case, where they filed an amicus brief explaining the judge’s flawed methodology in determining the geographic market.  Other discrepancies arose in the Chicago case, where Advocate and NorthShore alleged the FTC left out competitors like Northwestern Memorial Hospital, Rush University Medical Center and Presence Saint Francis Hospital when defining the market.  The merge, they said, would only lead to about a 28% market share, not 60% of general-acute inpatient hospital services like the FTC argues.

Increased prices are the primary concern of the FTC. The Commission alleges if the two systems were to merge they could command a premium by controlling a majority of the market and use their increased power to bargain with health plans. NorthShore and Advocate say they will offer a new, lower priced insurance product if allowed to combine. According to Advocate’s CEO, all the providers in Chicago are price-takers, not price setters. The proposed deal would serve 3 million patients a year at about 350 facilities including hospitals, clinics, doctors’ offices and outpatient centers. The outcome of FTC v Advocate-NorthShore is highly uncertain and healthcare providers will surely look to the outcome to gain a better sense of their future direction.

Definitive Healthcare has the most up-to-date, comprehensive and integrated data on over 7,700 hospitals, 1.4 million physicians, and numerous other healthcare providers.  Our database allows users to search by network, location, bed count, quality metrics, drugs prescribed, technology use and more.

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