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.

More Aggressive Review of Hospital Mergers Needed, Says FTC Commissioner

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The problems include ‘a legal shield’ enjoyed by nonprofit hospitals, and the solutions include more retrospective analysis of close calls, says Rebecca Kelly Slaughter.


KEY TAKEAWAYS

The FTC is prohibited from enforcing antitrust laws against nonprofits, which poses a challenge, Slaughter said.

The commission should conduct another round of retrospective study on closed healthcare mergers, she said.

Commissioners should be ‘as aggressive as possible’ moving forward to preserve healthcare competition, she added.

Federal Trade Commissioner Rebecca Kelly Slaughter told a liberal think tank Tuesday that antitrust regulators should take a more assertive approach to protect competitive forces among healthcare providers.

Slaughter, a Democrat appointed to the FTC by President Trump and confirmed last year, made the remarks in a speech at the Center for American Progress in Washington, D.C., where she took issue with what she described as “a legal shield for anticompetitive conduct” at nonprofit hospitals.

The FTC is allowed to review all hospital mergers, but it cannot enforce antitrust laws against nonprofits, including more than 45% of U.S. hospitals, she said.


“So, for example, if a non-profit hospital merger itself is not anticompetitive, but the newly merged entity engages in anticompetitive practices, the FTC is stuck on the sidelines,” Slaughter said in her prepared remarks.

“In effect, this means that all of the healthcare industry expertise that the FTC has worked for decades to, and continues to, develop cannot be deployed alongside the DOJ and state enforcers to stop anticompetitive practices by roughly half of all hospitals nationwide,” she added. “This is a significant lost opportunity.”

Slaughter called for greater scrutiny of horizontal and vertical mergers alike both in the future and in the past.

“I believe that the FTC should conduct a new round of retrospectives of healthcare provider mergers,” Slaughter said.

Studying the past has led the FTC to some of its biggest improvements in understanding market forces, as was the case with former Chairman Timothy J. Muris’ retrospective analysis of hospital mergers in the early 2000s, Slaughter said.

Moving forward, Slaughter said, the FTC should take another look at recently cleared “close-call hospital mergers” and those that were shielded from antitrust scrutiny by state laws despite posing significant concerns. This is consistent, she said, with a statement the FTC issued last fall when it decided not to challenge a proposed affiliation involving CareGroup Inc., Lahey Health System Inc., Seacoast Regional Health System, and others.

The FTC should also consider taking another look at vertical integration among healthcare providers, such as transactions involving hospitals and physician groups, she said.

“[W]e should be as aggressive as possible in challenging the mergers we encounter today, especially where the proposed consolidation involves new structural arrangements rather than traditional horizontal concerns,” Slaughter added. “It is important for parties considering mergers to know we will not shy away from challenging, for example, anticompetitive vertical organizations.”

“I am sensitive to the concern that we might lose litigation,” she added, “but our obligation is to identify the right outcome and fight for it.”

 

 

 

House Subcommittee Takes Dim View of Healthcare Consolidation

https://www.healthleadersmedia.com/strategy/house-subcommittee-takes-dim-view-healthcare-consolidation

Lawmakers and witnesses alike cited the ill-effects of hospital mergers and acquisitions in a long list of industry behavior they find troubling.


KEY TAKEAWAYS

An economics and health policy professor from Carnegie Mellon suggested lawmakers should give the FTC more power to review nonprofit mergers.

Lawmakers from both sides of the aisle expressed dissatisfaction with the healthcare industry’s consolidation trend and voiced support for legislative action.

A hearing of the House Judiciary Committee’s antitrust subcommittee would not have been a comfortable place Thursday for any healthcare executive touting the benefits of a planned merger or acquisition.

Lawmakers and witnesses took turns criticizing rampant consolidation among hospitals and other healthcare companies. While the public is often told these deals will lead to improved efficiency and higher quality care, those purported benefits frequently fail to materialize, they said.

Since the hearing grouped payer and provider consolidation with anticompetitive concerns about the pharmaceutical industry—an area that both major parties have expressed interest in addressing through congressional action—the discussion could signal how lawmakers will approach any legislation to address the problems they perceive.

Rep. Doug Collins, a Republican from Georgia and the committee’s ranking member, said hospital consolidation has had an especially detrimental impact on rural communities in his state.


“These communities often already have few options for quality care, so as hospital consolidation has increased over the past 10 years, rural communities like my own have been hurt the most,” Collins said.

“At times, these mergers and acquisitions can help rural communities by keeping facilities open, but often they result in full or partial closures and shifting patients from nearby facilities to those hours away,” he added.

Some problems caused by consolidation, such as increased travel times for emergency services, can “literally mean the difference in life and death,” Collins said.

Jerry Nadler, a Democrat from New York and the committee’s chairman, said there’s no question that the recent spate of mergers has contributed to the industry’s problems.

“It is well documented that hospital mergers can lead to higher prices and lower quality of care,” Nadler said.

Martin Gaynor, PhD, an economics and health policy professor at Carnegie Mellon University and a founder of the Health Care Cost Institute, said in his testimony that there have been nearly 1,600 hospital mergers in the past 20 years, leading most regions to be dominated by one large health system apiece.

“This massive consolidation in healthcare has not delivered for Americans. It has not given us better care or enhanced efficiency,” Gaynor said. “On the contrary, extensive research evidence shows us that consolidation between close competitors results in higher prices, and patient quality of care suffers for lack of competition.”

Since hospitals that have fewer competitors can better negotiate favorable payment terms, this consolidated landscape “poses a serious challenge for payment reform,” he added.

“Our healthcare system is based on markets. That system is only going to work as well as the markets that underpin it,” Gaynor said. “Unfortunately, these markets do not function as well as they could or should.”

Gaynor recommended several possible policy changes, including an end to policies that make it harder for new competitors to enter a market and compete and an expanded authority for the Federal Trade Commission to review potentially anticompetitive conduct by nonprofit entities. He also said lawmakers should consider imposing FTC reporting requirements for even small transactions to enhance the tracking capabilities of enforcement agencies.

To support his claims, in his written testimony, Gaynor pointed to research he completed with Farzad Mostashari of Aledade Inc. and Paul B. Ginsburg of The Brookings Institution.