The Federal Trade Commission left mixed clues as to the path forward in hospital merger challenges as it issued its final order and opinion in the Evanston (Ill.) Northwestern Healthcare case last week.
On April 28, the FTC issued documents describing how Evanston Northwestern will live up to a requirement that managed-care companies be allowed to bargain separately for contracts with Highland Park (Ill.) Hospital, which the north suburban Chicago system added as a third facility in a 2000 transaction. The remedy was a stipulation of the commissions August 2007 ruling that the deal violated antitrust laws though allowing the system to remain intact (Aug. 13, 2007, p. 6).
While the central theory advanced will guide future challenges, the commission emphasizes that this one was highly unusual in the way it started and the way it appears it will end. Most legal observers expect Evanston Northwestern to take the result to a federal appeals court. A spokesman for the system said theres been no decision whether to pursue that avenue.
In a statement, Evanston Northwestern touted the FTCs recognition of clinical improvements to Highland Park in the intervening years and said that the system would begin carrying out the prescription for restoring competition.
I think the FTC was between a rock and a hard place, said Jeff Miles, principal at Ober, Kaler, Grimes & Shriver. The public and maybe even Congress would have gone berserk if divestiture was ordered.
Miles and others suspect an appeal to the 7th U.S. Circuit Court in Chicago is inevitable because private parties will wield the commissions liability finding in lawsuits against the system. But Chul Pak, a partner at Wilson Sonsini Goodrich & Rosati in New York, suggested the system has the hospital it wanted and might prefer to move on with life. Its a powerful piece of evidence, but its not the slam dunk because its not a federal court decision, Pak said.
Pak also predicted that the commissions decision not to pursue divestiture will inspire targets of future challenges to argue that they should be allowed to go forward with a transaction deemed anticompetitive if they establish separate negotiating teams.
Yet the FTC lawyers successfully advanced a new way of arguing hospital merger cases after a string of losses in federal courts doing it the old way. Evanston Northwestern, they said, acquired market power because managed-care companies would need at least one of the three hospitals in their networks regardless of the many nearby competitors.