Advocate-NorthShore merger could threaten Chicago payers

Two businessmen shaking hands over a pile of money

A merger between Advocate Health Care and NorthShore University HealthSystem would create a 16-hospital network--a juggernaut that could command higher reimbursement rates from local insurers.

But would it threaten local insurers, including Blue Cross & Blue Shield of Illinois, which controls some 75 percent of metro Chicago’s commercial insurance market?

That’s a “definite maybe,” Allan Baumgarten, an independent healthcare consultant in Minneapolis, tells Crain’s Chicago Business.

A U.S. District Court judge recently refused to issue a preliminary injunction to stop the merger, saying the Federal Trade Commission failed to prove the deal would reduce competition in the area and increase the costs of healthcare services, FierceHealthcare previously reported.

The ruling came as a surprise: Many industry insiders expected the FTC to prevail given its success in recent years blocking mergers under the Clayton Antitrust Act, a 102-year-old law. But perhaps the tide is turning: It’s the second recent ruling to reject an FTC challenge on mergers.

But “insurers still have some advantages,” the Crain’s piece notes. “For one, the local market is fragmented, with a lot of hospitals. And as insurers steer patients toward cheaper options like outpatient surgery centers, the hospitals end up with a plethora of empty beds.”

- here’s the Crain’s anaysis (subscription required)