The possible merger in Knoxville is seen as a potential way to bring the areas healthcare providers into alignment, even in the eyes of the merging parties biggest competitor. Youve got nine hospitals in a county and thats a lot, said Tony Spezia, president and CEO of five-hospital Covenant Health, the markets dominant player. Five of those are big tertiary facilities with open-heart programs and all the rest of it
. The ones that are losing (money) have lost what the other ones are making.
The proposed deal would merge the three hospitals of struggling Baptist Health System of East Tennessee with four-hospital St. Marys Health System, which is owned by Cincinnati-based Catholic Healthcare Partners. Baptist is under the interim leadership of Wellspring Partners and was about to be acquired by for-profit Triad Hospitals before that company was bought by Community Health Systems.
My reaction is you would expect some consolidation in that market, said Richard Cowart, a health lawyer in the Nashville office of Baker, Donelson, Bearman, Caldwell & Berkowitz. The federal agencies, Cowart said, dont generally like to mount cases that look like its the feds trying to take over the local decisionmaking. I have not seen a lot of complaints in that market over this proposed merger.
Nevertheless, the agency has indicated it will remain aggressive. Indeed FTC Chairman Deborah Platt Majoras touted the Evanston Northwestern challenge in testimony this month before a Senate subcommittee considering the commissions reauthorization and added, Several other hospital mergers have been announced within the past several months, and the FTC has active investigations pending.
The FTC and the Justice Department, which share antitrust enforcement duties, dont disclose which deals are under investigation until a complaint is filed in federal court or administratively.
When and if that happens, its not clear that the Evanston Northwestern case improves the FTCs chances of persuading a federal judge to rely on its administrative opinion as precedent and stave off a deal, said Pak, the former FTC lawyer. Ultimately it has to go to federal court, and the FTC and (Justice Department) have been losing these cases in federal courts, Pak said.
But, Pak added, the enforcers are watching, and the Evanston Northwestern example provides a couple of simple lessons for board members and executives considering deals: Be very mindful of what your payerscustomersthink about the merger, and be very mindful of what your internal documents at the senior level say about the merger.