Jefferson Health and Einstein Healthcare merger moves forward after FTC withdraws challenge

https://www.healthcarefinancenews.com/news/jefferson-health-and-einstein-healthcare-network-merger-moves-forward-after-ftc-withdraws-0

Jefferson Health and Einstein Healthcare Network merger clear final hurdle after  FTC will no longer challenge - 6abc Philadelphia

Jefferson’s hospital network will grow to 18 locations with Einstein’s three general acute care hospitals and an inpatient rehabilitation hospital.

The merger between Pennsylvania-based Jefferson Health and Einstein Healthcare Network can now close after the Federal Trade Commission voted to withdraw its opposition to the deal, Jefferson Health announced this week.

The deal is now expected to be finalized within the next six months.

Earlier this year, the FTC voted 4-0 to voluntarily dismiss its appeal to the Third Circuit of the district court, according to the commission’s case summary.

Once the deal is complete, Jefferson’s network of hospitals will grow to 18 with the addition of Einstein’s three general acute care hospitals and an inpatient rehabilitation hospital.

WHY IT MATTERS

Merger plans were first announced in 2018 in a deal estimated to be worth $599 million.

The FTC initially blocked the merger because it believed it would reduce competition in the Philadelphia and Montgomery counties.

It alleged the deal would give the two health systems control of at least 60% of the inpatient general acute care hospital services market in North Philadelphia, at least 45% of that market in Montgomery County, and at least 70% of the inpatient acute rehabilitation services market in the Philadelphia area.

But late last year, a federal judge blocked the FTC’s attempt to stop the merger. Judge Gerald Pappert of the U.S. District Court for the Eastern District of Pennsylvania wrote that the FTC failed to demonstrate that there’s a credible threat of harm to competition. He pointed to other competitors in the region, such as Penn Medicine, Temple Health and Trinity Health Mid-Atlantic.

The FTC and the Commonwealth of Pennsylvania attempted to appeal the court’s decision, but after Jefferson and Einstein filed a motion to withdraw the case, the commission unanimously voted to drop its appeal.

THE LARGER TREND

The FTC is taking a closer look at healthcare mergers and acquisitions to better understand how physician practice and healthcare facility mergers affect competition. Earlier this year, it sent orders to Aetna, Anthem, Florida Blue, Cigna, Health Care Service Corporation and United Healthcare to share patient-level claims data for inpatient, outpatient and physician services across 15 states from 2015 through 2020.

Although M&A activity was down in 2020 due to the COVID-19 pandemic, Kaufman Hall called the 79 transactions that did take place “remarkable” for falling within the range of the 92 deals from the year before.

The analysts expect activity to ramp up moving forward, however. They predict that as health systems evaluate their business strategies post-pandemic, those in strong positions will take advantage of other systems’ divestitures to grow their capabilities and expand into new markets.

ON THE RECORD

“We are excited to have Einstein and Jefferson come together, as our shared vision will enable us to improve the lives of patients, the health of our communities and enhance our health education and research capabilities,” said Ken Levitan, the interim president and CEO of Einstein Healthcare Network.

“By bringing our resources together, we can offer those we care for – particularly the historically underserved populations in Philadelphia and Montgomery County – even greater access to high-quality care.”

Georgia health systems discard merger plans, averting FTC challenge

Federal Trade Commission (FTC) Definition

Dive Brief:

  • The Federal Trade Commission has closed its investigation of the merger between Atrium Health Navicent and Houston Healthcare System following news the two have abandoned their plans for a deal.
  • FTC staff had recommended commissioners challenge the merger on grounds that it would have led to “significant harm” for area residents and businesses in the form of higher healthcare costs, the FTC alleged. 
  • The tie-up between two of the largest systems in central Georgia would also hamper investment in facilities, technologies and expanded access to services, according to a statement released Wednesday.

Dive Insight:

FTC Acting Chairwoman Rebecca Kelly Slaughter said in the statement, “This is great news for patients in central Georgia.”

When the deal was originally announced, Atrium Health Navicent promised to spend $150 million on Houston over a decade, earmarking the money for routine capital expenditures and strategic growth initiatives, according to a previous review of the transaction by the state attorney general’s office.

After engaging with consultants at Kaufman Hall in 2017, leaders at Houston, an independent system, decided they needed to find a strategic partner to weather long-term challenges and ultimately picked Navicent.

Navicent recently merged with North Carolina-based Atrium Health, formerly known as Carolinas HealthCare System. At the time, the deal gave Atrium a foothold in the state of Georgia.

Healthcare consolidation has continued at a steady clip despite the pandemic, and the FTC will be closely investigating any deal involving close competitors. The agency is seeking to expand its arsenal to block future mergers by researching new theories of harm.

The FTC attempted to block a hospital deal in Philadelphia last year but has since abandoned its challenge after a series of setbacks in court. The judge was not swayed that the consolidation of providers would lead to an increase in prices given the plethora of healthcare options in the area.

Justice Department welcomes passage of the Competitive Health Insurance Reform Act of 2020

https://www.healthcarefinancenews.com/news/justice-department-welcomes-passage-competitive-health-insurance-reform-act-2020

Competitive Health Insurance Reform Act of 2020 (2021; 116th Congress H.R.  1418) - GovTrack.us

Health insurers are no longer immune from federal antitrust scrutiny for conduct considered the business of insurance.

The Competitive Health insurance Reform Act of 2020 became law on January 13, a move praised by the Department of Justice but opposed by health insurers.

Health insurers are no longer immune from federal antitrust scrutiny for conduct considered the business of insurance and regulated by state law.

With enactment of the Competitive Health Insurance Reform Act, the DOJ and Federal Trade Commission have expanded authority to prosecute alleged anticompetitive behavior, including data sharing between insurers. 

The McCarran-Ferguson Act previously afforded immunity by exempting from federal antitrust laws certain conduct considered the “business of insurance.” This exemption has sometimes been interpreted by courts to allow a range of what the Justice Department considered “harmful” anticompetitive conduct in health insurance markets.

The new law aims to promote more competition in health insurance markets by limiting the scope of conduct that’s exempt from antitrust laws. This move was praised by the Trump Justice Department shortly before the former president left office.

WHAT’S THE IMPACT?

The antitrust scrutiny is coming at a time when insurers are under a deadline to meet interoperability standards to share information with patients that meet Fast Healthcare Interoperability Resources, or FHIR, standards.

Eliminating the exemption undermines the goal of affordable coverage by adding administrative red tape and reducing market competition, according to Matt Eyles, president and CEO of America’s Health Insurance Plans

“The McCarran-Ferguson Act recognized that all healthcare is local, and that states should be able to govern their own health insurance markets,” Eyles said in December. “Removal of this exemption adds tremendous administrative costs while delivering absolutely no value for patients and consumers. It will unnecessarily add layers of bureaucracy, destabilize markets, create conflicting federal and state oversight requirements, and lead to costly litigation.” 

The National Association of Insurance Commissioners sent a letter to Senate leaders on December 2 voicing its concern for the bill’s passage.

“The premise of the Competitive Health Insurance Reform Act is that collusion among health insurance companies is permitted under state law and that the McCarran-Ferguson Act somehow currently protects these practices. This is not true. The McCarran-Ferguson antitrust exemption for health insurance does not allow or encourage conspiratorial behavior but simply leaves oversight of insurance, including health insurance, to the states – and state laws do not allow collusion,” commissioners said.

“The potential for bid rigging, price-fixing and market allocation is of great concern to state insurance regulators and we share your view that such practices would be harmful to consumers and should not be tolerated. However, we want to assure you that these activities are not permitted under state law,” commissioners wrote.

While insurers have not been thrilled with the move, Consumer Reports said the legislation is good for providers who have felt pressured into contract terms that benefit insurers.

THE LARGER TREND

The Justice Department has a track record of successfully enforcing the antitrust laws against health insurers. Over the past five years, the department has enforced the antitrust laws against health insurers involved in transactions valued at over $160 billion.

The Act will help the department build on those successes by requiring health insurers to play by the same rules as competitors in other industries. It will clarify when health insurers qualify for the McCarran-Ferguson exemption, and it will enable the Antitrust Division to spend resources more efficiently to achieve desired results, the Justice Department said.

On January 13, Trump signed into law the Competitive Health Insurance Reform Act of 2020, which limits the antitrust exemption available to health insurance companies under the McCarran-Ferguson Act. The act, sponsored by Rep. Peter DeFazio (D-Ore), passed the House of Representatives on Sept. 21, 2020 and passed the Senate on Dec. 22.

Hospital buy-ups of physician practices under fresh FTC scrutiny

FTC takes tech scrutiny to heart of Silicon Valley

Dive Brief:

  • The Federal Trade Commission sent orders to six health insurance companies to obtain patient-level claims data for inpatient, outpatient, and physician services from 2015 to 2020, the agency said Thursday.
  • The FTC wants to figure out how hospitals’ acquisitions of physician practices has affected competition.  
  • The agency sent orders to some of the nation’s largest insurance companies, including UnitedHealthcare, Anthem, Aetna, Cigna, Florida Blue and Health Care Service Corporation.

Dive Insight:

This action is part of a larger effort underway at the agency to consider new questions and areas of study to help it understand the ultimate impact of mergers. The hope is that those studies will yield evidence to better equip the agency to legally challenge mergers in the future. 

Health economists cheered the news online following the FTC’s Thursday’s announcement about studying physician practice buy-ups. 

Martin Gaynor, former director of FTC’s Bureau of Economics, tweeted: “This is a big deal – a huge # of physician practices are now owned by hospitals.” Gaynor is a health economist at Carnegie Mellon.

“Important step to advance FTC’s understanding of the market and could improve their ability to win cases,” Emily Gee, a health economist at the Center for American Progress, tweeted.

In the orders, the FTC asks the insurers for data such as the total billed charges of all health providers, total deductibles, copays and coinsurance paid by the patient. It also asks for data tied to each inpatient admission and outpatient and physician episodes during the time period in question, which will likely result in a barrage of data for the agency to review.   

“The study results should aid the FTC’s enforcement mission by providing much more detailed information than is currently available about how physician practice mergers and healthcare facility mergers affect competition,” the agency said in a statement. 

This area of study expands the agency’s current work. One area already of interest within this broader retrospective merger review program is the scrutiny of labor markets. 

The agency has traditionally focused on how healthcare tie-ups affect prices. But the agency has signaled that it is increasingly interested in how mergers and acquisitions ultimately affect workers’ wages, including nurses.

One area of concern for the FTC is states’ willingness to greenlight COPAs, or certificates of public advantage (COPAs), which essentially shield mergers from federal antitrust regulators in exchange for prolonged state oversight.

In 2019, the agency sent orders to five insurance companies seeking data to study the impact of COPAs.  

FTC signals nurses’ wages will become important measure in antitrust enforcement

https://www.healthcaredive.com/news/ftc-signals-nurses-wages-important-measure-antitrust-enforcement-hospitals/589142/

The Federal Trade Commission is revamping a key tool in its arsenal to police competition across a plethora of industries, a development that could have direct implications for future healthcare deals.

In September, the FTC said it was expanding its retrospective merger program to consider new questions and areas of study that the bureau previously has not researched extensively.

One avenue it will zero in on is labor markets, including workers and their wages, and how mergers may ultimately affect them.

It’s an area that could be ripe for scrutinizing healthcare deals, and the FTC has already begun to use this argument to bolster its case against anticompetitive tie-ups. Prior to this new argument, the antitrust agency — in its legal challenges and research — has primarily focused on how healthcare mergers affect prices.

The retrospective program is hugely important to the FTC as it is a way to examine past mergers and produce research that can be used as evidence in legal challenges to block future anticompetitive deals or even challenge already consummated deals.

“I do suspect that healthcare is a significant concern underlying why they decided to expand this program,” Bill Horton, an attorney with Jones Walker LLP, said.

So far this year, the FTC has tried to block two proposed hospital mergers. The agency sued to stop a proposed tie-up in Philadelphia in February between Jefferson Health and Albert Einstein Healthcare Network.

More recently, the FTC is attempting to bar Methodist Le Boneheur in Memphis from buying two local hospitals from Tenet Health in a $350 million deal.

In both cases, the agency alleges the deals will end the robust competition that exists and harm consumers in the form of higher prices, including steeper insurance premiums, and diminished quality of services.

The agency has long leaned on the price argument (and its evidence) to challenge proposed transactions. However, recent actions signal the FTC will include a new argument: depressed wages, particularly those of nurses.

In a letter to Texas regulators in September, the FTC warned that if the state allowed a health system to acquire its only other competitor in rural West Texas, it would lead to limited wage growth among registered nurses as an already consolidated market compresses further.

As part of its arguments, the FTC pointed to a 2020 study that researched the effects on labor market concentration and worker outcomes.

Last year, the agency sent orders to five health insurance companies and two health systems to provide information so it could further study the affect COPAs, or Certificates of Public Advantage, have on price and quality. The FTC also noted it was planning to study the impact on wages.

FTC turned to review after string of defeats

A number of losses in the 1990s led the agency to conduct a hospital merger retrospective, Chris Garmon, a former economist with the FTC, said. Garmon has helped conduct and author retrospective reviews.

Between 1994 and 2000, there were about 900 hospital mergers by the U.S Department of Justice’s count. The bureau lost all seven of the cases they attempted to litigate in that time period, according to the DOJ.

The defendants in those cases succeeded by employing two types of defenses. The nonprofit hospitals would argue they would not charge higher prices because as nonprofits they had the best interests of the community in mind. Second, hospitals tried to argue that their markets were much larger than the FTC’s definition, and that they compete with hospitals many miles away.

Retrospective studies found evidence that undermined these claims. That’s why the studies are so important, Garmon said.

“It really is to better understand what happens after mergers,” Garmon said. It’s an evaluation exercise, given many transaction occur prospectively or before a deal is consummated. So the reviews help the FTC answer questions like: “Did we get it right? Or did we let any mergers we shouldn’t let through?”

FTC moves to block New Jersey hospital acquisition

  • The Federal Trade Commission is suing to block New Jersey’s largest health system, Hackensack Meridian Health, from acquiring a close competitor, Englewood Health. That system operates Englewood Hospital, an independent hospital and one of the last in the area, according to the Star-Ledger.   
  • After the tie-up, Hackensack would control three of the six acute care hospitals in Bergen County, the most populated county in the state.
  • The loss of competition between the two would leave insurers with few options and would allow Hackensack to obtain higher prices from insurers, leading to higher premiums and higher out-of-pocket costs for consumers, the FTC alleged in a statement Thursday.

In each case, the FTC has argued the deals would eliminate close competitors and lead to higher costs and lower quality of care.

Hackensack Meridian Health announced the intent to merge in October 2019.

At the time, Hackensack said Englewood would become a tertiary hub for Hackensack with a focus on a slew of services lines including cardiovascular care, neurosciences and oncology. Englewood said it would also benefit from the affiliations Hackensack enjoyed with Memorial Sloan Kettering Cancer Center.

As part of the announcement, Hackensack committed to invest $400 million in Englewood Health.

Hackensack operates its flagship hospital, Hackensack University Medical Center, and partially owns Pascack Valley Medical Center, which are both within 10 miles of Englewood Hospital, according to the FTC.

FTC sues to halt Methodist Le Bonheur’s bid to buy 2 Tenet Memphis hospitals

Le Bonheur has plans to buy Memphis hospitals, Federal Trade Commission  against it | News Break

The Federal Trade Commission (FTC) filed a lawsuit to stop Memphis, Tennessee-based Methodist Le Bonheur Healthcare’s $250 million acquisition of two hospitals in the area owned by Tenet Healthcare.

The agency said in the federal lawsuit filed Friday that the acquisition of two Memphis-based hospitals known as Saint Francis would imperil competition in the area.

Competition would dampen for a “broad range of inpatient medical and surgical diagnostic and treatment services that require an overnight hospital stay,” the FTC said in a release Friday. “If the proposed acquisition is consummated, healthcare costs will rise.”

FTC said only four hospital systems provide general services to the area. If the deal goes through, the new health system would control approximately 60% of the Memphis market.

“It’s clear that patients in the Memphis area have benefited from the competitive pressure that Saint Francis brings to bear on Methodist, through lower rates, more options for insurers and patients, and quality improvements,” said Daniel Francis, deputy director of the FTC’s Bureau of Competition, in a statement.

FTC is seeking a preliminary injunction to halt the deal until completion of a trial next year.

This is the latest move by the FTC to combat hospital mergers. Last year, the FTC launched a probe into the effects of health system mergers on prices and healthcare quality.

Methodist and Tenet said in a joint statement they are reviewing the lawsuit and were bewildered by the move.

“We are surprised by the FTC action given the strong support for the transaction by local stakeholders, including leading local health plans, physicians, employers and community leaders,” the statement said. 

Intermountain, Sanford to merge into 70-hospital system

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/intermountain-sanford-to-merge-into-70-hospital-system.html?utm_medium=email

Top 10 Largest Health Systems in the U.S.

Salt Lake City-based Intermountain Healthcare and Sioux Falls, S.D.-based Sanford Health have signed a letter of intent to merge. 

The boards of both nonprofit organizations unanimously approved on Oct. 23 a resolution to support moving forward with the due diligence process. Pending regulatory and state approvals, the merger is expected to close in 2021. 

“We’re hoping that the actions taken … just 72 hours ago will culminate in a combined organization next summer,” Kelby Krabbenhoft, president and CEO of Sanford Health, said during an Oct. 26 news conference. 

Existing boards of trustees from both systems will join to form a combined board, and Gail Miller, chair of the Intermountain board, will serve as board chair of the merged organization. 

Marc Harrison, MD, president and CEO of Intermountain, will serve as president and CEO of the combined system, which will operate 70 hospitals and employ more than 89,000 people. Mr. Krabbenhoft will serve as president emeritus. 

“These are two great organizations with strong histories that are economically and clinically very strong,” Dr. Harrison said during the news conference. “This is something that should happen for the future of American healthcare.” 

Intermountain will be the parent company of the combined organization, and the merged system will be headquartered in Salt Lake City. 

Einstein warns of cuts, ‘death spiral’ without Jefferson merger

https://www.beckershospitalreview.com/hospital-transactions-and-valuation/einstein-warns-of-cuts-death-spiral-without-jefferson-merger.html?utm_medium=email

How to emerge from a 'death spiral' in stocks - MarketWatch

In a court filing, Einstein Healthcare Network warned that a move by the Federal Trade Commission to block its merger with Jefferson Health could lead to a “death spiral” at its Philadelphia flagship safety-net hospital, according to the Philadelphia Business Journal.

In court documents opposing an FTC analysis of the merger, Einstein said that its financial condition has deteriorated since 2017, resulting in operating losses averaging about $30 million per year.

Einstein said it will incur even greater losses, largely because of the challenging payer mix and large underinsured or uninsured population of its flagship Philadelphia medical center. 

Without a merger, “Einstein [would have to] dramatically cut its services at Einstein Medical Center Philadelphia, leading to job losses and even further reductions in maintenance and needed investment, precipitating a ‘death spiral’ that would jeopardize access to health care for many of Philadelphia’s underserved residents,” Einstein wrote in the documents, according to the Philadelphia Business Journal. 

The FTC announced in February its intent to sue to block the proposed merger, arguing that combining the two systems would reduce competition in Philadelphia and Montgomery counties.

“Jefferson and Einstein have a history of competing against each other to improve quality and service,” the FTC said in February. “The proposed merger would eliminate the robust competition between Jefferson and Einstein for inclusion in health insurance companies’ hospital networks to the detriment of patients.”

Einstein and Jefferson Health countered that a combined system still would face competition from other hospitals and operate in a challenging market dominated by one healthcare insurer, according to the report. 

Atrium, Wake Forest Baptist merge to create 42-hospital system

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Wake Forest Baptist, Atrium Health merge into a 'single enterprise' to be  based in Charlotte | Local | journalnow.com

Charlotte, N.C.-based Atrium Health and Winston-Salem, N.C.-based Wake Forest Baptist Health have completed their merger, creating a 42-hospital system with more than 70,000 employees. 

With the transaction complete, Wake Forest Baptist Health and Wake Forest School of Medicine will become the “academic core” of Atrium Health. The health system said it plans to build a second campus of the school of medicine in Charlotte. 

“As the healthcare field goes through the most transformative period in our lifetime, in addition to a new medical school, our vision is to build a ‘Silicon Valley’ for healthcare innovation spanning from Winston-Salem to Charlotte,” Atrium President and CEO Eugene A. Woods said in a news release. “We are creating a nationally-leading environment for clinicians, scientists, investors and visionaries to collaborate on breakthrough technologies and cures. Everything we do will be focused on life changing care, for all, in urban and rural communities alike. And we will create jobs that provide inclusive opportunities to enhance the economic vitality of our entire region.”

Atrium cited an independent economic analysis that showed the direct and indirect annual employment impact of the combined system exceeds 180,000 jobs. 

“The impact of the strategic combination will be far-reaching, elevating North Carolina as a clear destination of choice to receive medical care for people all across the nation,” said Julie Ann Freischlag, MD, CEO of Wake Forest Baptist Health and dean of Wake Forest School of Medicine. “Through our combined, nationally recognized clinical centers of excellence in multiple specialties, we will be able to expand our research in signature areas, such as cancer, cardiovascular, regenerative medicine and aging, and target bringing research breakthroughs to the community in less than half the time of the national average.”

Mr. Woods will serve as president and CEO of the combined system, and Dr. Freischlag was appointed chief academic officer for Atrium Health in addition to her current positions. 

A 16-member board of directors appointed by the Charlotte Mecklenburg Hospital Authority and Wake Forest University Baptist Medical Center will govern the new nonprofit enterprise.