FTC, in turnabout, takes a closer look at hospital mergers

The number of hospital mergers and acquisitions has grown, and that increase has prompted greater regulatory scrutiny of such deals.

For example, the Federal Trade Commission on March 28 ruled that ProMedica Health System in Ohio and Michigan had to divest itself of the recently acquired St. Luke’s Hospital in Maumee, Ohio. At the request of the FTC, the Solicitor General of the U.S. petitioned the U.S. Supreme Court on March 23, asking it to review lower court decisions related to the agency’s attempts to block the purchase of Palmyra Park Hospital in Albany, Ga., by Phoebe Putney Health System, which has facilities throughout that state.

The agency also filed an administrative complaint on Nov. 18, 2011, charging that the Peoria, Ill.-based OSF Healthcare System’s planned acquisition of Rockford Health System, also in Illinois, would reduce competition between hospitals and primary care physicians.

The FTC and the Dept. of Justice had some success in the 1980s winning hospital merger cases on the basis of violations to antitrust laws. They had a string of losses in the 1990s, and then stopped filing these cases.

“Both the FTC and the DOJ left the hospital merger business and determined that these cases were unwinnable in federal district court,” said Matt Reilly, assistant director of the FTC’s Bureau of Competition.

The agencies changed their strategies and gathered evidence that a lack of competition meant even nonprofit institutions would raise prices. They started challenging hospitals mergers again in 2008.

The majority of hospital mergers and acquisitions occur with no action by the agencies. Unlikely to trigger action are deals between parts of the health system that do not compete directly, such as hospitals and home health care or physician practices of different specialties. These arrangements have become more common as the health system seeks to form accountable care organizations and deal with other aspects of reform.

“We are much less concerned about vertical arrangements than close competitors merging,” Reilly said.

Eighty-six hospital merger or acquisition deals were completed in 2011, according to data published Feb. 28 by Irving Levin Associates. That was the highest number in the past 10 years.

At the same time, more physicians are working for hospitals. The number of physicians and dentists with full-time employment at community hospitals went up from 62,152 in 1998 to 91,282 in 2010, according to the American Hospital Assn.