FTC's New Antitrust Strategy: Unwind Completed Hospital Mergers

Fierce exclusive: Antitrust lawyer Charles Johnson discusses agency's latest actions and why hospitals should worry.

By Ron Shinkman
From Fierce Health Finance
May 7, 2015

The U.S. Supreme Court this week refused to review a lower court's decision to strike down ProMedica's acquisition of an Ohio hospital, the Toledo Blade reported, and it should serve as a warning to the hospital sector.

"It should be a cautionary tale," Charles Johnson, pictured right, a partner with the law firm of Holland and Knight in Atlanta and an expert in healthcare antitrust law, told FierceHealthFinance in an exclusive interview.

ProMedica's acquisition of St. Luke's Hospital in Maumee, Ohio, was struck down by a federal appeals court last year due to legal actions taken by the U.S. Federal Trade Commission, which had sued to reverse the deal. When the Supreme Court declined to take action, the lower court's order to unwind the transaction became binding. ProMedica is the dominant healthcare system in the Toledo area.

Johnson noted that the FTC's actions in the ProMedica case are significantly different than what the agency would have done 20 years or so ago. In the past, the FTC would sue to block deals it considered anticompetitive before they were finalized--often meaning that its burden of proof was not only enormous, but often answered with speculation.

Nowadays, the FTC is more likely to allow a deal to be completed before it makes a move. Such watchful waiting tends to bolster any case the FTC may bring, "so you can see what the effect is," of the deal, Johnson said. He cited another example of antitrust watchful waiting: Evanston Northwestern Healthcare's 2000 acquisition of Highland Park Hospital in the Chicago area. The FTC brought an administrative lawsuit five years after the deal was completed, claiming it had caused prices to rise. The health system's management agreed to separate managed care payer contracts in order to keep the merger intact.

Another such deal took place in Idaho, where the FTC recently won an unwinding of St. Luke's Health System's purchase of the Salzer Medical Group. That case could also be appealed to the U.S. Supreme Court.

Given that mergers and acquisitions in the hospital space will likely continue at a brisk pace, Johnson noted that not all deals will face a probe by the FTC. He said that if a merger would not result in dominance of a service area, the parties will likely escape regulatory scrutiny.