The Federal Trade Commission is winding down at least some of its investigations into previously consummated hospital mergers and currently is focusing its energies on a Wilmington, N.C., hospital merger, said healthcare antitrust attorneys and other sources close to the probe.
On July 8, Waukegan, Ill.-based Vista Health announced that the FTC's bureaus of economics and competition would recommend ending the hospital look-back review of the merger that formed it.
In May 2002, the FTC announced that it would study various mergers to see whether they kept promises to cut costs, improve care and maintain efficiencies (May 6, 2002, p. 12).
Interviews with hospital officials and healthcare antitrust attorneys indicate that the FTC has been cautious in its research and has had a difficult time gathering market and pricing data. To date the agency has not challenged any of the hospital mergers it is reviewing as part of the retrospective study.
In 2000, Frankfort, Ill.-based Provena Health, a seven-hospital Catholic system, formed a joint venture to operate its 254-bed Provena Saint Therese Medical Center with Waukegan-based Victory Health Services, parent of 120-bed Victory Memorial Hospital. Last year that joint operating agreement, called Vista Health, came under FTC scrutiny. Vista Health, which is losing money and saw its bonds downgraded in June, was taxed by the growing legal bills, reduced borrowing power and uncertainty.
Sources said that might have contributed to the FTC's decision to tell Vista it likely would drop the investigation before the commissioners vote in late August. In addition, the merger is unraveling. In the first quarter ended March 31, 2003, Vista posted an operating loss of $2.7 million. In 2002, the joint venture lost more than $17 million on total revenue of $154.8 million, said James McNichols, Vista's chief financial officer.
Vista spokeswoman Linda Lampinen said while the five FTC commissioners could overrule the bureaus and still bring action against Vista, "our understanding is that is unlikely."
"We've complied with all of the FTC requests and been as helpful as we could," Lampinen said. "But it has been an intensive process and has not been easy."
FTC spokeswoman Cathy MacFarlane agreed that the bureaus' letter does not mean that Vista is off the hook. "A recommendation is not a directive to action," MacFarlane said. "The committee can decide to accept or reject the recommendation." But she said the commissioners rarely overrule bureau recommendations.
But Vista officials, their attorneys and other healthcare antitrust lawyers close to the investigation said the FTC tentatively plans to announce at least some of the results of the look-back study in late August after the commissioners vote.
Chicago healthcare antitrust attorney David Marx, who represents Provena, said he believes that the FTC will choose to roll out a package wrapping up all or most of the cases.
"I would not be stunned to learn that the FTC staff will recommend pursuing a challenge in one or more cases," Marx said. "What they're really focusing on is merger transactions in which prices have increased and increased beyond what they would have in a competitive market."
But even as the look-back review appears to be closing favorably for Vista, other systems linger in limbo.
The FTC has turned up the heat in its investigation of the 1998 purchase of Cape Fear Memorial Hospital for $98 million by the county-owned public hospital, New Hanover Regional Medical Center. They are the only acute-care hospitals in Wilmington, N.C., but the merger went unopposed by state and federal antitrust regulators.
In June, New Hanover officials met with the directors of the FTC bureaus of competition and economics to plead their case. Attorney Robert Leibenluft of the Washington law firm Hogan & Hartson, who represents New Hanover, said the FTC was looking at whether price increases were connected to the acquisition of Cape Fear. Leibenluft said he didn't know whether the FTC staff already had recommended an enforcement action or not.
He said the FTC appears to be aiming to resolve the investigation by August or September.
Officials at two other health systems-Three Rivers Healthcare, Poplar Bluff, Mo., owned by Tenet Healthcare Corp., and three-hospital Evanston (Ill.) Northwestern Healthcare-that are subjects of the FTC study said they have not learned about the status of the investigation.
Modern Healthcare also has learned the FTC is investigating at least two other health system mergers, one of which remains unidentified. The FTC has requested information regarding the 2000 merger between 420-bed Summit Medical Center in Oakland, Calif., and 468-bed Alta Bates Medical Center in Berkeley, Calif., now owned by Sacramento-based Sutter Health, sources close to the probe said. Carolyn Kemp, a spokeswoman from the renamed hospital, Alta Bates Summit Medical Center, confirmed the inquiry.
Kemp said Alta Bates is one of many mergers across the country the FTC is reviewing. Kemp said the hospital is cooperating with the commission, which she said issued a July 1999 statement that it would not oppose the merger. Kemp said the merger saved the financially challenged Summit hospital from closure and preserved community healthcare resources and saved hundreds of jobs.
Michael Cowie, who heads the FTC's hospital merger section, refused to comment on the bureaus' recommendation to the commissioners, nor would he speculate on the timing of the look-back study's conclusion.