Com­mon prob­lem ...

... but three-way so­lu­tion may draw le­gal at­ten­tion

Modern Healthcare - - The Week - Vince Gal­loro

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.”

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