FTC intervenes to block Chicago healthcare merger

The U.S. Federal Trade Commission (FTC) has taken legal action to stop a pending merger between two large Chicago-area healthcare providers, Advocate Health Care and NorthShore University HealthSystem, saying the combination of their 16 hospitals would make medical services much more expensive for residents in and around the Windy City.

The FTC's complaint makes it the third time in recent weeks the agency has tried to stop a merger between once competing hospitals or healthcare systems, according to The New York Times. It has taken similar actions to stop a deal between Penn State Hershey Medical Center and PinnacleHealth System in Pennsylvania and Cabell Huntington Hospital's proposed purchase of St. Mary's Medical Center in West Virginia.

"Competition between Advocate and NorthShore results in lower prices, higher quality and greater service offerings," said the FTC complaint filed in the Eastern Division of the U.S. District Court for the Northern District of Illinois.

Officials with both Advocate and NorthShore say they will fight the FTC complaint, claiming that the merger would allow them to better compete against the state's predominant insurer, Blue Cross and Blue Shield of Illinois. As a result, the two systems were "price takers, not price setters," Advocate CEO James H. Skogsbergh told the New York Times.

Prominent members of the legal community have observed that the FTC has taken a new tack regarding consolidation in the hospital sector: Allow the merger to be announced and then intervene. However, some experts have also said that given the torrid pace of M&A in the healthcare sector, too many consolidations among providers will hurt access for patients to prompt and reasonably priced care.

The aggressive action being taken by the FTC has raised some concerns that it could also step into the payer side of the equation and try to block big mergers involving Anthem's purchase of Cigna and Aetna's acquisition of Humana.

"The FTC case is bad news for the insurance companies," David Balto, a former policy director at the FTC, told Forbes about the intervention in the Advocate-North Shore deal. "It shows the agencies are willing to go to court unless parties have strong arguments that consumers will benefit from the merger."

To learn more:
- here's the complaint (.pdf)
- read the NYT article
- check out the Forbes article