Putting on the brakes

FTC takes aim at hos­pi­tal deals in Ohio, Ge­or­gia

Modern Healthcare - - THE WEEK IN HEALTHCARE - Joe Carl­son

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.

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