- The Federal Trade Commission has moved to block the proposed merger between two nonprofit Pennsylvania health systems over anticompetitive concerns in its first challenge to hospital M&A in more than three years.
- Jefferson Health and Albert Einstein Healthcare Network both provide inpatient general acute care and inpatient acute rehabilitation services in Philadelphia County and Montgomery County. A marriage between the two systems, which agreed to definitively merge in September 2018, would harm patients because the two systems would no longer compete for patients and for inclusion in payer networks, the FTC says.
- Jefferson and Einstein defended the deal Thursday in a joint statement provided to Healthcare Dive, saying they remain “confident our merger will result in continued high-quality care for our consumers.”
FTC Commissioner Christine Wilson has pledged to be tougher on hospital deals in 2020, including reviewing previously closed deals to see if they’ve delivered on promised cost and quality metrics. The last time the FTC questioned a major hospital merger was in 2016, when it urged Virginia and Tennessee not to approve the union of large operators Mountain States Health Alliance and Wellmont. The push was unsuccessful, and the two coalesced into rural system Ballad Health.
The deal, first announced in March 2018, has stagnated over the past two years as it was scrutinized by regulators at the FTC and Pennsylvania Attorney General Josh Shapiro.
“This merger would eliminate the competitive pressure that has driven quality improvements and lowered rates,” Ian Conner, Director of the FTC’s Bureau of Competition, said in a statement. The rivalry between the two nonprofit players for market dominance has resulted in upgraded medical facilities and technological investments, but that progress could stall if Jefferson and Albert Einstein combined, FTC said.
Jefferson and Einstein boast a combined roughly $5.9 billion in annual revenue, along with 18 hospitals, more than 50 outpatient and urgent care centers and a handful of rehab and post-acute facilities. Jefferson, the bigger player, has 14 hospitals across South Jersey and Philadelphia, Montgomery and Bucks counties.
The regulators said they will soon file a formal complaint in the U.S. District Court for the Eastern District of Pennsylvania.
The complaint alleges that as a result of the merger, Jefferson and Einstein would control at least 60% of the inpatient general acute care services market in North Philadelphia, and 45% in Montgomery. That includes services like medical or surgical diagnostics and treatments requiring an overnight stay.
Jefferson and Einstein manage six of the eight inpatient rehab facilities for recovering from serious, acute conditions in the Philadelphia region, and would control at least 70% of that market if combined.
The hospitals said their marriage represents a “creative effort” to increase access at a time when safety net hospitals are struggling.
“We believe we have presented a strong and comprehensive case as to how the merger would benefit the patients we serve and advance our academic mission without reducing competition for healthcare services,” the systems, which have had an academic partnership for more than two decades, said.
Several studies have debunked theories that bigger is better in terms of quality of care when it comes to health systems.
FTC plans to seek a temporary restraining order and preliminary injunction to prevent Jefferson and Albert Einstein from consummating the merger pending an administrative trial scheduled to being in September this year.