Rep. McDermott pushes FTC for more guidance on health system mergers

Rep. Jim McDermott (D-Wash.) has asked the Federal Trade Commission (FTC) to do more to clarify how it will approach enforcement of the Clayton Act on hospital and health system mergers when many of the provisions in the Affordable Care Act encourage healthcare consolidation.

The Clayton Act was after all created to be a consumer protection law. If fear of its enforcement holds providers back from making the types of changes needed to expand into population health models, improve services, lower costs and raise outcome measures, the spirit of the law is not honored. Rep. McDermott, a ranking member of the House Committee on Ways and Means Subcommittee on Health, noted as much in his letter to the FTC.

“We do not want providers sitting on the sideline waiting to ‘take the plunge’ because they are concerned that there will be regulatory challenges; instead, they should be aware of what the rules are at the front end and regulators must be equipped to challenge conduct that does not meet the rules,” Rep. McDermott wrote.

The letter became public the day after the U.S. Court of Appeals for the Sixth Circuit upheld the FTC's finding that ProMedica, the dominant hospital provider in Lucas County, Ohio, should not have merged with St. Luke's, an independent community hospital in one of the more affluent suburbs of Toledo, Ohio, because the merger violated the Clayton Act's prohibition on deals that adversely affect competition. However, for practical purposes, the court-ordered divestiture of St. Luke's could sink the independent hospital — which had struggled to compete with ProMedica before the merger — and leave the county with a single major hospital provider anyway.

Rep. McDermott's concerns were threefold:

1. Limited FTC staff and the increasing number of healthcare provider mergers might prevent the FTC from issuing the right type of guidance early on in a contemplated healthcare merger or acquisition. Post-merger court ordered divestitures are disruptive to consumers and should be avoided with more timely guidance.
2. The guidance the FTC has issued so far, while useful, only relates to Medicare’s Shared Savings Program for accountable care organizations (ACOs). It does not cover the many other forms of ACO arrangements currently either in use or being set up between providers and private payors.
3. The agency may not have full explored how it could use new analytics and data tools to conduct increased oversight and review of transactions at the front end.

McDermott recently requested a study from the Government Accountability Office on healthcare industry consolidation and wrote to the FTC that it is important to be vigilant in identifying unintended consequences of healthcare reform on consumers and swiftly act to address those consequences.