A case that touches a flashpoint between the hospital and insurance industries—whether hospital mergers are responsible for rising healthcare prices—is headed to a federal appeals court this week.
The case, ProMedica Health System v. Federal Trade Commission, includes evidence purportedly showing that officials with the independent St. Luke's Hospital in Maumee, Ohio, clearly thought that they could extract higher prices from insurance companies after being acquired by their larger competitor to the north, ProMedica, in Toledo.
St. Luke's CEO Daniel Wakeman told his board of directors in 2009 that such an affiliation “has the greatest potential for higher hospital rates. A ProMedica-SLH partnership would have a lot of negotiating clout,” according to evidence presented in the case that the FTC seized on as proof (PDF) of the hospitals' improper intentions.
St. Luke's joined with ProMedica in 2010, but ProMedicaagreed to hold the entities separate pending the outcome of an FTC challenge. The FTC has won at each stage of the case so far, convincing a U.S. District Court judge to order the entities held separate and then winning an administrative proceeding that included 30 days of testimony and more than 2,600 exhibits.
The FTC has ordered ProMedica to sell off St. Luke's, which the hospitals are appealing. The two sides will get a total of about 30 minutes for oral arguments Thursday morning before the 6th U.S. Circuit Court of Appeals in Cincinnati.
ProMedica maintains that it's not relevant whether prices would rise following the merger—known legally as a “joinder” in this case—because St. Luke's was losing money, on average, for every patient it treated.
“With or without a merger, St. Luke's was going to raise prices,” ProMedica's brief to the 6th Circuit (PDF) says. “Given this history of unsustainably low prices, a prediction that St. Luke's prices would increase post-joinder, even if true, fails to prove the resulting prices are anticompetitive.”
The FTC, though, argues in its brief that ProMedica had among the highest prices in Ohio, while St. Luke's was known as a “low-cost, high-quality” provider in the region.