December 15, 2011 – It may not jibe with the health reform law's message of integration, but the Federal Trade Commission continues to challenge provider mergers on grounds that they're anticompetitive.
The courts' reaction last week? Decidedly mixed.
In a pair of closely watched decisions—with significant implications for hospital strategy—the FTC won the first round of its fight against an Ohio health system's proposed acquisition but was stymied in its similar challenge against a Georgia hospital.
Updating the scorecard: FTC's Ohio victory, Georgia loss
The FTC's recent scrutiny stands out because the commission—reeling from a string of defeats—was largely silent on provider acquisition activity for about a decade.
But the commission won two challenges in 2008 after adopting a new strategy: use retrospective data to show how hospital mergers ultimately led to higher prices.
That approach has informed FTC's case against Toledo's ProMedica, which centers on whether the system's August 2010 purchase of St. Luke's Hospital in Maumee would increase ProMedica's bargaining leverage. FTC contends the merger would ultimately force health insurance companies to pay higher rates to the hospitals and increase consumers' premiums. ProMedica executives have said the acquisition would coordinate care and improve quality at St. Luke's by facilitating electronic health record implementation and streamlining care delivery.
However, an administrative law judge last Monday found for FTC and ordered ProMedica to divest St. Luke's Hospital. ProMedica executives say they plan to appeal to the 6th Circuit Court of Appeals, assuming the four-member FTC upholds the administrative judge's ruling.
But the FTC also suffered a loss last week in its case against Georgia-based Phoebe Putney Health System. A U.S. Court of Appeals upheld Phoebe Putney's planned move to acquire nearby Palmyra Park Hospital from HCA.
“We're very pleased that the court ruled to allow us to go ahead with purchase,” Phoebe Putney's VP of Corporate Strategy, Jackie Ryan, told Modern Healthcare. Ryan added that the system faced capacity issues that would be addressed through the acquisition. However, the FTC has yet to officially drop the matter.
Looking for lessons
In a thorough examination of the FTC-ProMedica dustup, Modern Healthcare's Joe Carlson notes that hospital executives "caught discussing higher prices and bargaining clout before a merger are likely destined for legal trouble later on." For example, FTC cited a pre-merger email from St. Luke’s president that openly discussed ProMedica’s pricing power and "would come to haunt" the organizations, Carlson writes.
But another takeaway may be the FTC's potential break with the White House on implementing health reform. Specifically, ProMedica executives argue that the agency's scrutiny clashes with the Affordable Care Act's stated goals.
“We have an unsustainable model, which we all agree on,” ProMedica President Randy Oostra told Modern Heathcare's Carlson. “And yet we're being told: You have to play by the same rules that have existed for many, many years and, oh, by the way, we're not open to anything unique, creative, or anything we'll try differently.
"All we want you to do is dissolve and go away...if one of you goes out of business or if you spend hundreds of millions of dollars competing, that's OK.”
ACO rule illustrates disagreement over approach
In a discrete example, the White House and FTC haven’t seen eye to eye on the antitrust implications of accountable care organizations. The Obama administration—and by extension, the Department of Justice—has viewed ACOs through the lens of consumer benefit. Meanwhile, the FTC spots a risk that ACOs could help already strong health care providers further fix prices.
The divide has fueled a highly unusual public split—with one official this year complaining to the Wall Street Journal that DOJ and FTC resorted to coin flips to solve some jurisdiction issues—and sparked grumbling that the White House has taken an inconsistent approach to antritrust.
It also has manifested as HHS rolled out iterations of its ACO rules in 2011. As the Advisory Board's Sarah O'Hara Katz has extensively tracked on the Network Advantage blog, Medicare’s proposed shared savings rule instituted additional FTC barriers for potential acquisitions. However, the final MSSP eliminates mandatory antitrust review for would-be clinical integration programs.
Dan Diamond is managing editor of The Daily Briefing.
