A Federal Trade Commission challenge of a proposed merger of the largest hospital operators in Chicago could be a problematic sign for the rest of the rapidly consolidating U.S. healthcare industry.
Advocate Health Care and NorthShore University HealthSystem say they will fight a complaint filed by the FTC, which voted 4-0 to issue an administrative complaint and authorize its staff to seek a temporary restraining order. The FTC, which called the case its third recent challenge of a hospital merger, said the combined entity would control more than 50% of the inpatient care in an affluent area north of Chicago. In all, the two health systems combined have 16 hospitals and hundreds of physicians under their control via various employment relationships throughout Chicago and Illinois.
“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,” said Debbie Feinstein, Director of the FTC’s Bureau of Competition.
The challenge of these medical care providers coming together comes as more Americans get health coverage under the Affordable Care Act and health insurance companies, too, are engaged in unprecedented consolidation.
The insurance mergers, which would take the largest number of publicly traded health plans from five to just three, were announced this past summer. It remains unclear how long the federal government will take for its antitrust review, which is expected to last for at least several months into 2016.
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“The FTC case is bad news for the insurance companies,” David Balto, a former policy director at the Federal Trade Commission, said of the Chicago health system merger’s potential impact nationally. “It shows the agencies are willing to go to court unless parties have strong arguments that consumers will benefit from the merger.”
When the FTC has challenged healthcare deals in the past, it has looked at payment contracts between medical care providers and insurance companies and whether the doctors and hospitals have too much leverage in particular markets. In examining mergers of health insurance companies who pay doctors and hospitals, analysts say insurers have touted efforts to keep costs under control for consumers and make healthcare more efficient.
But Balto says insurance companies should “face a much harder challenge making these claims than hospitals since economic studies have shown little or no efficiencies from past insurance mergers.”
Doctors and hospitals say healthcare is changing rapidly and the focus on providing more less costly outpatient care has meant more competition as retail clinics owned by giants like
Walgreens, which announced it was buying pharmacy chain
The FTC’s case against the Chicago hospital operators will be closely watched given their size. Advocate and NorthShore were among the first health systems in the country to have their providers connected by electronic medical records and Advocate, in particular, has been an early adopter of value-based care models pushed by the Obama administration to move Medicare payments away from fee-for-service medicine.
“Prior to embarking on this 15-month intensive effort, we recognized the magnitude of what was before us,” said Advocate’s president and chief executive officer Jim Skogsbergh. “We laid out a detailed roadmap with the FTC on our plans to advance the delivery of care, improve quality and reduce cost. Our commitment to elevate the model of care requires a new way of thinking in this fast and evolving marketplace.”
