FTC supported by 11 states in suit against Advocate-NorthShore merger

Eleven state attorneys general have filed an amicus brief backing the Federal Trade Commission’s attempt to block the merger of two health systems in suburban Chicago, Advocate HealthCare and NorthShore University Health System.

The support came from Connecticut, Idaho, Iowa, Maine, Massachusetts, Minnesota, Mississippi, Montana, Oregon, Pennsylvania and Washington. The merging hospitals only have locations within Illinois, but the brief argued the merger would set a “dangerous legal precedent with far-reaching policy implications,” with other proposed consolidations using it to argue mergers won’t result in monopolies.

“The recent wave of hospital consolidation has resulted in the creation of large healthcare systems that wield substantial market power,” the brief said. “Even when a considerable number of patients in those markets travel for medical care, providers are able to successfully demand post-merger rate increases from commercial payors because payors need local hospitals to sell attractive, commercially-viable insurance networks. The payors are forced to pass on provider-imposed rate increases to patients in the form of higher prices, the effect of which may ultimately reduce access to care.”

The argument made by the 11 states mirrored what the FTC itself said in its appeal. When a district court judge ruled against the FTC’s injunction in June, the states claimed the substance of the commission’s antirust argument wasn’t considered, only the definition of the market which would be affected by the consolidation.

“The court instead emphasized the travel patterns of some patients, ignoring evidence that the willingness of those patients to travel would not discipline a hypothetical monopolist’s ability to increase rates in an 11 hospital market in the North Shore Area,” the brief said. “The court’s decision ignored the realities of healthcare markets, resulting in an erroneous conclusion on the merits—i.e., that the government failed to meet its burden on the ultimate likelihood of success in the case. If upheld, the court’s decision creates ill-informed law that would impede the ability of law enforcers to ensure consumers receive the benefit of vigorous competition in healthcare markets around the country.”

Arguments in the case are scheduled to be heard on August 19.

The FTC has suffered a string of defeats in its efforts to block hospital consolidation, losing a similar bid for an injunction against Pinnacle Health System and Penn State Milton S. Hershey Medical Center’s merger in Pennsylvania, and after losing in district court over the Advocate-NorthShore deal, chose not to contest the consolidation of Cabell Huntington and St. Mary’s Medical Center, two hospitals located three miles apart in Huntington, West Virginia.