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July 20, 2022

FTC has blocked 4 hospital mergers this year. More could be coming.

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    The Federal Trade Commission (FTC) has increased its efforts to combat consolidation in the health care industry, blocking four hospital mergers this year alone—and this aggressive antitrust enforcement is expected to increase in the future, Harris Meyer reports for Kaiser Health News.

    Hospital mergers always promise 'economies of scale.' Why do so few deliver?

    FTC works to curtail large hospital mergers

    Last year, President Joe Biden instructed FTC and other federal agencies to promote market competition across several industries, including health care. According to Biden, widespread hospital mergers and acquisitions have led to the 10 largest health care system controlling 25% of the total market and contributed to hospital closures in rural and underserved areas.

    Research shows that hospital acquisitions or mergers often cause prices to rise, with highly consolidated markets, such as those in northern California and western Pennsylvania, having higher prices than other areas.

    In addition, large mergers may also affect working conditions for physicians and other health care professionals, Meyer reports. For example, some providers have said they are pressured to sign contracts with "onerous, take-it-or-leave-it" terms that prevent them from working for competitors in the same market or state.

    So far, FTC has blocked these four hospital mergers this year, arguing that they could negatively impact prices and quality of care for patients:

    • Lifespan and Care New England Health System in Rhode Island
    • Hackensack Meridian Health and Englewood Healthcare Foundation in New Jersey
    • RWJBarnabas Health and St. Peter's Healthcare System in New Jersey
    • HCA Healthcare and five hospitals in Utah that are part of the Steward Health Care System

    "This should be a lesson learned to hospital systems all over the country and their counsel: The FTC will not hesitate to take action in enforcing the antitrust laws to protect healthcare consumers," said Holly Vedova, director of FTC's Bureau of Competition.

    FTC increases scrutiny of vertical mergers

    In addition to horizontal mergers between hospitals, FTC has also begun challenging vertical mergers in which hospitals, insurers, or other health care organizations acquire companies that provide different products, services, or staffing, Meyer reports.

    "The biggest concern in vertical mergers is giving one competitor control of an input that other competitors need access to," said Mark Seidman, an assistant director in FTC's Bureau of Competition. "That either forecloses competitors from that input or raises the cost of that input."

    Last year, FTC commissioners voted unanimously to file an administrative complaint to block Illumina, which produces gene-sequencing machines, from acquiring Grail, a company developing an experimental blood test that uses gene sequencing to detect early forms of cancer. In the complaint, the agency argued the acquisition could limit Grail's competition in the market.

    Currently, FTC and other federal agencies "are very suspicious of vertical acquisitions, and I think they're willing to be extremely aggressive in investigating them," said Douglas Ross, an attorney who teaches antitrust law at the University of Washington. "But whether the courts go along or not, we're way too early to know."

    Will blocking mergers actually help consumers?

    According to FTC, aggressive antitrust enforcement in the health care industry will help limit price increases, protect patient access and quality of care, and prevent unfair labor practices and pay cuts.

    However, antitrust experts say preventing mergers will likely lead to pushback from the health care industry, courts, and FTC's Republican commissioners. In addition, some mergers that are blocked could end up being beneficial for patients, employers, and insurers by lowering costs while still preserving access.

    "By overinvestigating, you are putting a tremendous burden on parties seeking to do combinations that are beneficial, potentially deterring pro-competitive behavior," said Leigh Oliver, an antitrust attorney at Clifford Chance.

    In addition, some experts are skeptical whether FTC's antitrust actions will be able to help patients and employers who face high prices in areas largely controlled by one or two health systems. Instead, it may be necessary to directly regulate health care prices.

    "There's not a lot the FTC can do to challenge hospitals' ability to raise prices once they have acquired market power," said Thomas Greaney, a research professor at the University of California Hastings College of the Law. "So there's a natural reaction in some states to say, 'Let's regulate those prices.'" (Meyer, Kaiser Health News, 7/18)

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