FTC challenges big hospital merger in Chicago suburbs

The Federal Trade Commission moved Friday to block a proposed merger between Illinois systems Advocate Health Care and NorthShore University HealthSystem—the third hospital deal the FTC has moved to block in the past six weeks. The Illinois systems immediately said they will fight back.

Advocate CEO Jim Skogsbergh said the systems offered to enter into an agreement to address the FTC's concerns about the deal's potential effects on prices. “In interviews with the commission in the last 10 days it became pretty clear to us our message was falling on deaf ears,” Skogsbergh said.

The merged system would have a combined 15 acute-care hospital campuses, a children's hospital and a large group of employed and affiliated doctors in the Chicago area.

In an administrative complaint, the FTC alleged the deal would allow the system to control more than 50% of general acute-care inpatient hospital services in Chicago's North Shore suburbs.

“This merger is likely to significantly increase the combined system's bargaining power with health plans, which in turn will harm consumers by bringing about higher prices and lower quality,” Debbie Feinstein, director of the FTC's Bureau of Competition, said in a statement.

NorthShore, at the time called Evanston Northwestern Healthcare, was the target of a pivotal FTC challenge a decade ago. The government retrospectively challenged its 2000 acquisition of a third hospital, and laid the groundwork for a string of successful hospital cases over the past several years.

The FTC has authorized its staff to ask a federal judge to block the Advocate-NorthShore deal pending administrative proceedings scheduled to begin May 24 of next year. Either party may appeal the outcome to the federal commissioners themselves, and a final decision from them will likely take at least a year. At that point, the parties could appeal the decision in federal court, and the case could go to either the 7th U.S. Circuit Court of Appeals or the D.C. Circuit Court of Appeals.

NorthShore CEO Mark Neaman said it would be a “travesty” not to fight the FTC action, and that he's optimistic the systems can beat the injunction in U.S. District Court in Chicago. “We know it might be a bit of a struggle, but we think a fair and impartial judge in Chicago will give us a fair opportunity to advance our mission,” Neaman said.

The FTC, meanwhile, is on a winning streak with federal judges. Earlier this year, the 9th U.S. Circuit Court of Appeals sided with the commission in a case challenging the acquisition of a large physician group by Boise, Idaho-based St. Luke's Health System.

The NorthShore-Advocate challenge is the latest in a series of recent FTC actions against hospital mergers. The FTC is also challenging a proposed merger between Penn State Hershey (Pa.) Medical Center and PinnacleHealth, Harrisburg, Pa., as well as Cabell Huntington (W.Va.) Hospital's proposed acquisition of crosstown rival St. Mary's Medical Center, if the Catholic Church and state officials allow the deal.

The recent spate of challenges, however, doesn't likely signal a change in FTC enforcement, said David Marx Jr., who heads McDermott Will & Emery's Chicago antitrust and competition practice group. He said the number of recent challenges is merely a reflection of the timing of the filing of those cases, and the FTC's completion of its investigations into them.