On the de­fense

AHA says most merg­ers aren’t anti-com­pet­i­tive

Modern Healthcare - - THE WEEK IN HEALTHCARE - Beth Kutscher

With the health­care re­form law cast­ing in­tense scru­tiny on costs and what drives them, the Amer­i­can Hos­pi­tal As­so­ci­a­tion wants to de­flect the no­tion that hos­pi­tal con­sol­i­da­tion is a sig­nif­i­cant fac­tor.

Last week, the AHA came out with an anal­y­sis of six years of hos­pi­tal merg­ers and ac­qui­si­tions. A de­clin­ing num­ber of them, the re­port con­cluded, in­volve over­lap­ping mar­kets.

The vol­ley comes as the in­dus­try awaits an ap­peals court rul­ing on the Fed­eral Trade Com­mis­sion’s bid to un­wind a hos­pi­tal deal in Ohio be­tween ProMed­ica and St. Luke’s Hos­pi­tal that an­titrust en­forcers pre­dict will lead to higher prices.

The AHA anal­y­sis looked at 316 trans­ac­tions in­volv­ing 551 hos­pi­tals be­tween 2007 and 2012. The pro­por­tion of merg­ers with an over­lap in at least one metropoli­tan sta­tis­ti­cal area (MSA) de­creased to 32% last year from 60% in 2007, ac­cord­ing to the re­port.

When the two par­ties were op­er­at­ing in the same mar­ket, al­most 90% were in MSAs with at least five com­peti­tors, the re­port con­cluded. And when there were five or fewer com­peti­tors—the sit­u­a­tion with 20 deals—most of the trans­ac­tions in­volved a small hos­pi­tal in a small com­mu­nity.

Those hos­pi­tals were likely to be in se­ri­ous fi­nan­cial straits and “there were clearly tan­gi­ble ben­e­fits that ac­crued to the com­mu­nity,” said Richard Pol­lack, AHA ex­ec­u­tive vice pres­i­dent. The ac­quired hos­pi­tals—with­out scale or ac­cess to cap­i­tal—were at risk for clo­sure, he said.

Nearly all hos­pi­tal merg­ers and ac­qui­si­tions un­dergo an­titrust re­view, and the vast ma­jor­ity are ap­proved, the AHA pointed out in the re­port. But the govern­ment is look­ing closely at th­ese deals and has chal­lenged four since 2011.

Ken­neth Fields, a for­mer FTC lawyer who now fo­cuses on an­titrust at Jones Day, noted that even when there are mul­ti­ple play­ers in the mar­ket, reg­u­la­tors will fo­cus on the ex­tent of di­rect com­pe­ti­tion be­tween the two merg­ing par­ties. The FTC, he said, is es­pe­cially in­ter­ested in how much lever­age the merg­ing par­ties will have with pay­ers.

In the ProMed­ica case, the FTC seized upon com­ments that the CEO of St. Luke’s Hos­pi­tal in the Toledo sub­urb of Maumee made to his board of di­rec­tors in 2009: that join­ing ProMed­ica would have “the great­est po­ten­tial for higher hos­pi­tal rates.”

Amer­ica’s Health In­sur­ance Plans has ar­gued re­peat­edly that con­sol­i­da­tion gives providers greater lever­age with pay­ers and leads to higher costs for pa­tients. It re­it­er­ated that po­si­tion in a court fil­ing in the ProMed­ica case and in a blog post last week.

Pol­lack coun­tered that price growth has reached a his­toric low and ar­gued that hos­pi­tals have only so much con­trol over prices be­cause many years of con­sol­i­da­tion among in­sur­ers means a sin­gle payer now con­trols a lion’s share of the com­mer­cial mar­ket in many re­gions.

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