(This story was updated at 2:35 p.m. ET.)
The antitrust battle over Advocate Health Care and NorthShore University HealthSystem's proposed merger isn't over yet, as a federal appeals court in Chicago on Monday sent the Federal Trade Commission's challenge back to trial.
The 7th U.S. Circuit Court of Appeals ruled on Monday that a lower court's decision not to pause the proposed merger over antitrust concerns was “erroneously flawed,” and overlooked how the deal could impact patients.
At the heart of the case was the proposed geographic market for the Advocate-NorthShore merger. The FTC used a narrow market to show that insurers and customers would be harmed by the consolidation. Insurers wouldn't be able to create marketable networks without the combined hospital system, and patients would face higher medical costs. The hospitals challenged those assumptions and alleged the FTC's proposed market ignored major competitors in the Chicago metropolitan region.
But the FTC won out for now, until a trial court can reevaluate the geographic market evidence.
“Even with the deference we give a district court's findings of fact, the district court's geographic market finding here was clearly erroneous,” the 7th Circuit said in its decision.
The 30-page appellate decision repeatedly noted that U.S. District Judge Jorge Alonso didn't appropriately consider the FTC's evidence that Chicago's northern suburbs would be negatively affected by the Advocate-NorthShore consolidation. FTC's proposed geographic market included 11 hospitals in Chicago's northern suburbs, six of which would be part of the new Advocate-NorthShore system. The remaining five do not have an academic medical center.
According to the panel, insurers have not been able to create marketable health network for Chicago employers without including at least some of the NorthShore or Advocate hospitals. Although some consumers may be willing to travel to hospitals outside the FTC's proposed market for healthcare, the 7th Circuit said that doesn't negate the anticompetitive effects the merger could have to those who wish to stay local.
Advocate and NorthShore expressed disappointment in the appellate court's decision, and said they believe the proposed merger would lower costs and improve outcomes for consumers
“We believe that blocking this merger will be a loss to consumers and further underscores the conflicting message with the objectives of the Affordable Care Act,” the health systems said in a statement.
Monday's ruling marks the second appellate win in as many months for FTC hospital merger challenges. In September, the 3rd Circuit paused a proposed merger between Penn State Hershey (Pa.) Medical Center and PinnacleHealth System over its own market analysis issues. The Pennsylvania health systems ultimately dropped their proposed merger in the face of a prolonged administrative antitrust review battle.
For now, the Advocate-NorthShore merger will remain on pause, until the federal district court in Chicago can reevaluate the FTC's request for a preliminary injunction.
