Common problem ...
... but three-way solution may draw legal attention
The strategy that the two hospitals in Waterbury, Conn., are pursuing— forming a three-sided joint venture with an investor-owned hospital operator—isn’t necessarily a model for other midsize cities across the country.
What they aim to address with that strategy and the questions that are raised by their potential consolidation, however, are com- vices—a cancer center, open-heart surgery and pediatrics, said Darlene Stromstad, who became president and CEO of Waterbury Hospital and its parent, Greater Waterbury Health Network, on July 1.
“I like to, tongue in cheek, say that we’ve been negotiating a merger for a hundred years,” said Chad Wable, CEO of St. Mary’s. “We’ve had talks on and off for the entire nine
“We would never have been able to do this by ourselves,” Stromstad said.
Art Lerner, an antitrust lawyer with the firm Crowell & Moring, said antitrust enforcers do take into account whether a deal brings benefits to consumers that might outweigh the lessening of competition. They are skeptical if the tieup does little more than give the two hospitals more bargaining power against commercial health plans, because then the benefits accrue to the hospitals, rather than consumers, Lerner said. “In this case,” he added, with “the plans to build a new hospital and shut down the two existing hospitals, it presumably gives more credibility to them, because they’re putting their money where their mouth is.”
The FTC and the Justice Department also will consider the reactions from health plans, employers and the state’s attorney general and health secretary, Lerner said. Connecticut Attorney General George Jepsen was not available for an interview, according to a spokeswoman, but he said in a written statement that he plans to review this deal under both antitrust and charitable assets laws.
David Marx Jr., an antitrust lawyer with McDermott Will & Emery, sees the tension between healthcare reform, particularly in the Medicare accountable care organizations that it supports, and the Obama administration’s stricter antitrust enforcement.
Marx, who disclosed that his firm is involved with the Waterbury deal, argued that antitrust enforcers focus too narrowly on inpatient care, despite a decades-long trend of care shifting to outpatient settings (See related story, p. 32). They also fail to recognize that most health plans can survive not having an in-network provider in a midsize city much better than the hospital in question, as the hospital is so reliant on commercially insured patients, Marx said.
“Is it better for the community that you let one of them fail and the assets are gone and you end up with one hospital anyway?” Marx said. “That’s a decision that’s going to have to be made in a lot of communities around the country.”
Lerner said Obama administration officials from the FTC, HHS and the Justice Department would argue that they’re “all singing from the same songbook,” even as they wrestled with the tension in the respective ACO guidance issued by HHS (via the CMS) and the FTC/Justice joint effort.
“The premise of all of that is that we improve quality and save money,” Lerner said. “If you’re simply helping to create a monopoly, and hoping it will be a benevolent monopoly, I don’t think any part of the administration is talking about that.”