The Federal Trade Commission's decision to take more time to examine the proposed merger between Advocate Health Care and NorthShore University HealthSystem in Illinois is in line with what legal experts say is the agency's move to apply more scrutiny to deals between hospitals in adjoining markets.
NorthShore CEO Mark Neaman and Advocate CEO Jim Skogsbergh wrote last week in a joint note to their employees that the FTC's action was not unexpected and that the systems have started gathering information to respond to the agency's requests.
If the two systems merge, they will have 15 acute-care hospital campuses combined, a children's hospital and a large group of employed and affiliated doctors in the Chicago area. The system's new name would be Advocate NorthShore Health Partners.
NorthShore's Evanston (Ill.) Hospital and Advocate Lutheran General Hospital, Park Ridge, Ill., are about 10 miles apart, but the systems have few overlapping service areas despite their substantial Chicago-area footprints.
Not all large deals are subject to such “second requests” from the FTC, said Mitchell Raup, a shareholder with Polsinelli in Washington. But second requests aren't typically enough to scare merging parties away from deals. “It may be time-consuming to respond to it, so it may delay the closing,” Raup said.
Jeff Miles, an antitrust attorney with Ober Kaler, said parties wouldn't typically abandon a deal unless they first had a “very strong indication it would be challenged.”
The Illinois merger comes amid a wave of deals creating regional mega-systems as providers adjust to declining inpatient volume and work to assemble the structures to manage population health.
During a recent FTC and Department of Justice workshop on healthcare competition, FTC Chairwoman Edith Ramirez said federal antitrust enforcers are taking note. “We now also hear growing concern that provider consolidation in non-overlapping product or geographic markets may also lead to higher prices,” she said.
“This is a new area and it's not clear where the FTC will go with this,” Raup said. But hospitals and health systems should no longer assume their transactions will sail through the review process because they're in different markets. “The FTC may take a harder look at it than you'd expect,” he said.
