FTC once again tries to block a healthcare merger—this time a physician practice acquisition in North Dakota

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The Federal Trade Commission took action Thursday to block a large rural nonprofit healthcare system from acquiring a large physician group over claims it will reduce competition within the marketplace.

The Federal Trade Commission took action Thursday to block a large rural nonprofit healthcare system from acquiring a large physician group over claims it will reduce competition within the marketplace.

It’s the latest example of the FTC’s quest to preserve competition within the industry and unwind acquisitions that would give a healthcare provider greater market share and lead to higher costs but not necessarily better care. In recent years the agency has blocked the acquisitions of St. Luke’s Health System in Idaho and the Saltzer Medical Group, the planned merger of NorthShore University Health System and Advocate Health Care, a proposed deal between Penn State Health and PinnacleHealth and Cabell Huntington Hospital’s proposed purchase of St. Mary’s Medical Center in West Virginia.

This week the agency, along with the Office of the Attorney General of North Dakota, filed a complaint (PDF) in federal district court seeking a temporary restraining order and preliminary injunction to stop the proposed deal between Sanford Health and Mid Dakota Clinic pending an administrative trial on the merits of the case. The administrative trial is scheduled to begin on November 28, 2017.

The acquisition would create a physician group with at least 75% share of physician primary care and several other healthcare services, the FTC said in an announcement. The deal violates antitrust law because it significantly reduces competition for adult primary care physician services, pediatric services, obstetrics and gynecology services, and general surgery physician services in the greater Bismarck and Mandan metropolitan area of North Dakota, the FTC said.

Sanford Health bills itself as the largest, rural, not-for-profit healthcare system in the country. It has 45 hospitals and 289 clinics in nine states and three countries. The system is the largest employer in the Dakotas and has more than 28,000 employees including 1,300 physicians in more than 80 specialty areas of medicine. The Mid Dakota Clinic employs more than 90 doctors and practitioners.

The FTC notes in the complaint that the two organizations are each other’s closest rivals in the four-county Bismarck-Mandan region of North Dakota, an area with a population of 125,000.  If the deal is allowed to go forward, the agency said in the complaint that it would be the only physician group offering general surgery physician services in the affected area.

 “This merger is likely to reduce significantly the competitive options available to medical insurance providers, which in turn will lead to deteriorating terms for provision of medical care, including higher prices and lower quality,” Tad Lipsky,acting director of the FTC’s Bureau of Competition, said in the announcement.

Sanford Health and Mid Dakota Clinic currently compete to join commercial insurers’ provider networks, which Lipsky said spurs the organizations to improve their technology, expand services, recruit high-quality physicians and provide patients with convenient and accessible physician and surgical services. “The transaction would eliminate that competitive pressure,” he said.

But the two healthcare organizations told The Bismarck Tribune that the FTC's actions are "extremely frustrating" because they relied on national, legal and economic experts to evaluate the partnership.

“The best way to describe our reaction is that we are exasperated with the delay that the FTC’s inquiry has already caused and that these proceedings will continue to cause," Shelly Seifert, M.D., board chair of the Mid Dakota Clinic, said in a statement to the newspaper.

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