The U.S. Supreme Court will consider Friday whether to take up a Federal Trade Commission case on whether Ohio-based health system ProMedica violated antitrust laws when it acquired a financially struggling area hospital.
Some legal experts say it's unlikely the high court will agree to hear ProMedica's appeal of a lower court ruling ordering it to divest St. Luke's Hospital in Maumee, Ohio. The widely watched appeal comes as hospitals across the country are fretting about federal regulators' toughening antitrust posture at the same time they are eyeing consolidation to reduce costs and better coordinate care.
“I don't see novel legal issues that the court is going to want to consider,” said Matthew Cantor, a partner with Constantine Cannon.
During a private conference Friday, the justices are scheduled to consider whether to hear the case. During that conference they could decide to hear it, not to hear it, or to put off making the decision until a later conference. Any decision made Friday won't likely be announced until Monday. It only takes the votes of four justices to accept a case.
Toledo-based ProMedica appealed after the 6th U.S. Circuit Court of Appeals in Cincinnati sided with the FTC on the acquisition of St. Luke's. The 6th Circuit panel said the acquisition would reduce competition, leading to higher prices for patients and insurers.
ProMedica attorneys argued that selling St. Luke's would lead to the flailing hospital's closure. But the appeals court rejected that argument, saying that while the hospital was financially weakened, it wasn't in imminent danger of closing.
The argument that an institution is failing is a valid one under antitrust law to defend a merger, Cantor said. But the argument that an institution is weakened is not a legally recognized defense, he added.
Whether that second argument should be legally recognized is an interesting question, Cantor said, but he's not sure it's the type of issue the Supreme Court would want to consider.
Douglas Ross, a partner with Davis Wright Tremaine, agreed the issue is interesting but unlikely to persuade the justices to take the case. "If you have a very weak hospital but not a failing (one), how should that play into merger analysis?” he asked. “That's a good issue. Is it an issue that's going to grab the attention of the Supreme Court? We'll find out, but I doubt it.”
Ross noted that it's been nearly 40 years since the Supreme Court took a merger case on the merits of the merger itself.
In 2013, the high court ruled that a hospital acquisition deal involving Phoebe Putney Health System in Albany, Ga., was not immune from antitrust laws. But that decision wasn't based on the underlying merits of the merger.
ProMedica argued that the 6th Circuit's opinion was flawed in assuming that greater market share would lead to price increases.
Charles Johnson, a partner with Holland & Knight, said the fact that the healthcare landscape is changing so rapidly might suggest the justices will want to hear the case. But he's not sure that some of ProMedica's arguments are supported.
Whether or not ProMedica gets a hearing before the justices, the case will continue to have implications for other hospitals and systems looking to merge, legal experts say. “It's part of a string of cases that demonstrates the FTC is going to aggressively challenge hospital consolidations that are anticompetitive,” Cantor said. “It shows that if providers are going to consolidate they should be very, very attuned to the competitive consequences of that merger.”
Recently, the 9th U.S. Circuit Court of Appeals refused a request from St. Luke's Health System in Idaho to rehear its antitrust case before the full court. Earlier this year, a 9th Circuit panel sided with the FTC, ruling that St. Luke's acquisition of a physician group violated antitrust laws despite St. Luke's argument that the deal would improve patient care.
