Putting on the brakes
FTC takes aim at hospital deals in Ohio, Georgia
Evidence of the federal government’s antitrust agenda in healthcare went on display in Washington and Atlanta in the past two weeks as government lawyers tried to stop a hospital acquisition in Ohio and convince a judge to stop another one in Georgia.
The Federal Trade Commission and lawyers with Toledo, Ohio-based ProMedica wrapped up a summerlong bench trial with closing arguments Sept. 29 and a blizzard of court filings over the system’s attempt to purchase competitor St. Luke’s Hospital in Maumee, Ohio. A decision from the administrative law judge in Washington is due by Dec. 2.
No sooner had one group of FTC lawyers concluded their case with ProMedica than another went to court in Atlanta to challenge a proposed merger between two fiercely competitive hospitals in Albany, Ga.
In that case, the FTC is contesting the proposed $195 million purchase of HCA’s Palmyra Park Hospital by the publicly owned Phoebe Putney Health System. The government lost in the trial court in July, and appealed the decision to the 11th U.S. Circuit Court of Appeals, which heard arguments Oct. 5. It’s not clear when that decision will be issued.
In both cases, government lawyers say the deals would reduce competition and give the hospitals leverage to negotiate higher prices with private insurers, driving up healthcare costs. FTC attorneys declined to comment.
Jeff Kuhn, chief legal officer and general counsel for ProMedica, said the close scrutiny of hospital transactions like ProMedica’s came just as the Patient Protection and Affordable Care Act ushered in a new era of cooperation among providers. He said the scrutiny would have a “chilling effect” on hospital merger activity, noting that ProMedica has already spent several million dollars defending its purchase.
“Healthcare reform really promoted the idea of providers coming together and collaborating,” Kuhn said. “When that happened, the FTC decided to take a look at a number of transactions.”
Asked what would happen to hospital prices locally if ProMedica’s purchase of St. Luke’s is allowed to stand, Kuhn said he thought prices should decline. Later in the interview, he clarified: “The idea is that when we brought St. Luke’s in, we would achieve efficiencies which should drive costs down, which should then manifest itself in lower prices for the community,” he said.
Matthew Reilly, assistant director of mergers at the FTC’s Bureau of Competition, wrote in a post-trial brief in the ProMedica challenge that every health plan witness in the trial testified that St. Luke’s prices will increase after a merger.
“St. Luke’s own documents are explicit: By joining with ProMedica, St. Luke’s expected to obtain significant negotiating clout with health plans and planned to exploit that clout to get higher rates,” he wrote. “St. Luke’s own documents are also explicit about the effects of this clout: St. Luke’s rates would ‘skyrocket.’ ”
A decision on ProMedica’s acquisition of St. Luke’s, above, is expected by Dec. 2.