Dec 29, 2020

Federal Courts Reject Challenges to Pennsylvania Hospital Merger

By Daniel O. Carroll, Esq.

On December 8, 2020, a federal district court in the Eastern District of Pennsylvania denied a request from the Federal Trade Commission (“FTC”) and Pennsylvania attorney general to preliminarily enjoin a proposed merger between Thomas Jefferson University and Albert Einstein Healthcare Network. See FTC, et al., v. Thomas Jefferson Univ., et al., 2020 U.S. Dist. LEXIS 229735 (E.D. Pa., Dec. 8, 2020). Seeking a preliminary injunction to prevent the merger, the initial administrative complaint filed in March alleged that the proposed merger between the two healthcare systems (with 17 hospitals) would reduce competition and increase prices in two Pennsylvania counties (Philadelphia and Montgomery). Judge Gerald Pappert rejected these arguments holding that the government failed to meet its burden of proof. 

Judge Pappert found that the government’s expert’s econometric calculations did not show that its geographic markets correspond to the commercial realities of southeastern Pennsylvania’s competitive healthcare industry. Furthermore, testimony primarily from two (of the region’s four) major commercial insurers is not unanimous and is not supported by the record as a whole. Rather, the Court found that the insurers’ conclusory assertions that they would have to agree to price increases with the hospitals were not credible. Evidence of the aspirations of the health systems to become “more indispensable” to insurers by virtue of the merger does not change the record to show that, from the insurers’ perspective, insurers would in fact pay a price increase for hospital services in the geographic markets instead of looking to hospitals outside those markets. Failing to establish its prima facie case that the insurers would not avoid a price increase by looking to hospitals outside those markets, the government did not show “that there is a credible threat of harm to competition during the time between the denial of this preliminary injunction and the final adjudication of” the merits. 

On December 21, 2020, the Third Circuit Court of Appeals issued a one-page order denying the government’s appeal of the Court’s decision. 

Recently, the FTC appears to be more active in its attempts challenge hospital mergers. Hospitals and health systems considering merger should take heed with respect to this increased antitrust scrutiny but should also take note of the favorable factors in the Court’s analysis of this case.

For more information, contact Daniel O. Carroll, Esq. at doc@spsk.com or (973) 631-7842.

 


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