Advocate, NorthShore punch back at FTC

Advocate Health Care and NorthShore University HealthSystem bolstered their response to the Federal Trade Commission's move to block their pending merger, offering a strategy to create a new health insurance product that will be priced at least 10% below the cheapest comparable plan on the market.

The two Chicago-area health systems argued that their proposed merger would not result in higher prices for consumers or a loss in bargaining leverage among insurance companies, nor would it have any other anti-competitive effects.

In a court document filed on March 18 under seal but made public today, they said neither health system on its own could create a new insurance product that would serve as broad of a geographic market at a price as low as the one they propose.

"Despite a more than yearlong investigation and the production of 2.6 million pages of documents, there are no documents and there is no testimony—zero—showing or suggesting that Advocate and/or NorthShore will raise prices as a result of the merger," Advocate and NorthShore claim in the filing.

They urge the court to throw out the commission's request for a preliminary injunction, which would effectively kill the merger.

"If this merger is blocked, Chicagoland consumers will be harmed by losing the opportunity to save hundreds of dollars per individual in the network every year," the health systems said in the filing.

FTC spokeswoman Betsy Lordan declined to comment.

Downers Grove, Ill.-based Advocate, the state's largest healthcare system, and Evanston-based NorthShore, the dominant health network in Chicago's northern suburbs, announced plans to merge in September 2014. Together, they would form a 16-hospital system called Advocate NorthShore Health Partners that would be the largest nonprofit health system in Illinois and among the top dozen or so in the country.

In 2014, Advocate and NorthShore generated combined revenue of $7.1 billion and $462 million in operating income. The two had a combined 45,000 employees and 4,182 beds.

The FTC in December moved to block the merger on antitrust grounds, contending the mega-deal would produce a system that controls more than half of general acute care inpatient hospital services on the North Shore.

“The result would likely be significant harm to consumers—with rising healthcare costs and diminished incentives to upgrade services and improve quality,” the FTC said in its filing.

But in the latest filing, the health systems contend the FTC gerrymandered the market that a combined system would serve, carving out major competitors in order to "fabricate a presumption of anti-competitive effects."

Advocate and NorthShore say the FTC's argument that most consumers prefer to receive hospital services "locally" runs counter to data that "clearly shows that an extraordinary 27% of patients leave the North Shore Area to receive inpatient hospital services." Further, they say, the FTC ignores another critical fact: Almost half of patients treated in the North Shore area travel from outside the area.

A federal administrative trial is scheduled to start April 6 in U.S. District Court in Chicago. A win could be an uphill battle for Advocate and NorthShore. The FTC has successfully fought hospital mergers in court for years.

"Advocate, NorthShore punch back at FTC" originally appeared on the website of Crain's Chicago Business.