The Federal Trade Commission has unanimously affirmed its administrative law judges surprising 2005 decision that Evanston (Ill.) Northwestern Healthcares now seven-year-old merger with Highland Park (Ill.) Hospital is illegal under federal antitrust law.
ENH President and Chief Executive Officer Mark Neaman described the long-awaited decision as a victory because the commissions order reverses a demand that the system cut Highland Park loose. The FTC instead lays out a remedy under which the systems hospitals would negotiate separately with payers, with its original two hospitals as one unit and Highland Park as another.
The 2005 decision against the ENH merger was considered a landmark victory for the government, coming on the heels of a string of legal defeats for the antitrust enforcers in the Justice Department and the FTC. The case also represented a change in strategy. Instead of challenging the proposed merger before it happened, the FTC filed an antitrust complaint in 2004, using post-merger price hikes to support its claim.
FTC Chairman Deborah Platt Majoras wrote in the 91-page opinion that the evidence demonstrates that the transaction enabled the merged firm to exercise market power and that the resulting anti-competitive effects were not offset by merger-specific efficiencies.
But, Majoras added, the potentially high costs inherent in the separation of hospitals that have functioned as a merged entity for seven years instead warrant a remedy that restores the lost competition through injunctive relief.
The system has until Sept. 10 to submit a plan to comply with the FTCs order, which asks for a firewall to prevent any sharing of information between negotiating teams and allows payers to dissolve their existing ENH contracts and start over under the new terms.
Its good news and we are very pleased, Neaman said in an interview of the remedy ordered. But he criticized the FTCs post-merger attack as inherently unfair and challenged the conclusionalong with the data and reasoning the commission used to support itthat the merged system is anti-competitive.
Neaman said that ENH has not decided whether to appeal. -- by Gregg Blesch