Healthcare antitrust lawyers were unsure of the degree to which a report on healthcare competition issued last month by the Federal Trade Commission and the U.S. Justice Department's Antitrust Division would affect the FTC's merger challenge of a not-for-profit suburban Chicago hospital system.
If the FTC wins its February challenge of the 2000 merger between Highland Park (Ill.) Hospital and two-hospital Evanston (Ill.) Northwestern Healthcare, its stated remedy for restoring competition along Chicago's North Shore suburbs is an extremely costly hospital divestiture.
While references to retrospective merger challenges are rare in the federal report, several of its recommendations are likely to be aired during the Evanston Northwestern trial. The trial is slated to begin Jan. 13, 2005, before an FTC administrative law judge in Washington, healthcare antitrust observers said.
In an administrative complaint on Feb. 10, the FTC challenged the Evanston Northwestern merger, alleging that the system's three hospitals extracted huge price increases from payers after the deal and illegally fixed prices for physician services, in violation of federal law (Feb. 16, p. 6).
The long-awaited, 361-page report on the agencies' hearings on healthcare competition did not reveal any new positions but did offer recommendations for improving competition for healthcare services. The agencies did not suggest specific advice on the Evanston Northwestern lawsuit, but observers said several of the issues addressed in the report could surface during the trial, such as the agencies' opinion that healthcare providers' tax status should not be considered in merger challenge resolutions and that previous market analysis methods should be reassessed.
David Balto, of the Washington office of Robins, Kaplan, Miller & Ciresi, said the July 23 report buttresses the FTC's administrative complaint against the Illinois system, for example noting that a not-for-profit health system should not be regarded more favorably by antitrust regulators than a for-profit system.
"One of the report's objectives is to strengthen some of the positions (the FTC) will take in court," Balto said. "The FTC believes that geographic markets have been too narrowly defined and that courts should not take a more liberal stance in hospital mergers simply because the hospitals are nonprofit. One goal (of the report) is to reverse eight years of litigation defeats."
He said the report is critical of regulatory attempts to control prices after mergers have been completed, noting that community commitments to win antitrust regulators' approval-such as promises to fund foundations or restrain price increases-don't work.
Former FTC official Mark Horoschak, now a lawyer with the Charlotte, N.C., office of Womble Carlyle Sandridge & Rice, said the report "clarifies FTC positions on some of the issues that will inevitably arise in the Evanston Northwestern litigation."
Horoschak predicted that Evanston Northwestern would argue it is a not-for-profit health system with community interests at heart and a community board that would not allow it to unfairly raise prices.
Evanston Northwestern Vice President David Loveland declined to discuss how the report might affect the system's case because of the pending litigation.
Though requiring a health system to divest a merged hospital is rare, the FTC has occasionally pulled apart mergers, healthcare antitrust lawyers said. Toby Singer, a healthcare antitrust attorney with the Washington office of Jones Day, said the FTC has ordered at least three hospital divestitures. But those divestitures required for-profit hospital chains to sell hospitals after merging with other chains owning competing hospitals in the same markets.
Singer said if the government is successful in the Evanston Northwestern case, the system will have to divest the hospital.