Ad­vo­cate, NorthShore merger faces up­hill bat­tle against FTC

Modern Healthcare - - THE WEEK AHEAD - —Lisa Schencker

Two Chicago-area health sys­tems may have a tough fight ahead when they ar­gue in court this week that they should be al­lowed to merge de­spite the Fed­eral Trade Com­mis­sion’s ob­jec­tions.

A hear­ing is sched­uled to be­gin Wed­nes­day in fed­eral court in Chicago over the FTC’s re­quest to pause a merger be­tween Ad­vo­cate Health Care and NorthShore Univer­sity HealthSys­tem.

The FTC al­leges the deal would cre­ate a sys­tem that con­trols more than 50% of general acute-care in­pa­tient hospital ser­vices in Chicago’s north sub­urbs, where the sys­tems now op­er­ate com­pet­ing hos­pi­tals.

The sys­tems, how­ever, counter that the ge­o­graphic area the FTC de­fines as their mar­ket doesn’t ac­count for all their com­pe­ti­tion. They also say they will cre­ate a new in­surance prod­uct that will in­cen­tivize providers to keep pa­tients healthy to avoid un­nec­es­sary in­pa­tient ser­vices. That prod­uct will cost 10% less than the lowest-priced com­pa­ra­ble prod­uct now avail­able, they say.

Ex­perts pre­dict the sys­tems may face an up­hill bat­tle given a re­cent string of FTC vic­to­ries.

Jeff Miles, an an­titrust ex­pert with Ober Kaler, said the sys­tems may be asked why they have to merge to cre­ate the new in­surance prod­uct. Miles also said it’s been a long time since a hospital sys­tem has won a case against the FTC based on ar­gu­ments about ge­o­graphic mar­ket.

“The chal­lenge for the merg­ing par­ties is that you’ve got ex­pe­ri­enced an­titrust en­forcers on the other side who have a very well-de­vel­oped method­ol­ogy for how to eval­u­ate these hospital merg­ers, and the courts have pretty much signed on to how the FTC and other en­forcers ... be­lieve that an­titrust anal­y­sis should pro­ceed,” said Matthew Can­tor, a part­ner at Con­stan­tine Can­non.

Ad­vo­cate Lutheran General Hospital, Park Ridge, Ill.

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