Courts and FTC should accept healthcare mergers that help underserved people
When most Americans go to the doctor or the hospital, they have one thing on their mind: they want the best care possible. For some Americans, a law that has nothing to do with health care can end up getting in their way.
Last summer, President Biden asked the Federal Trade Commission to actively oppose mergers that harm competition, and the FTC immediately issued a Press release cautioning, “Hospital leaders making merger plans should take note.”
The FTC’s tact might make sense if health care mergers were always at odds with quality care. They are not. Some mergers have real benefits for patients, and the FTC should change its practices and seek to facilitate those benefits.
In recent years, hospitals and physician groups have increasingly joined forces to overcome the escalating costs of providing care. Experience has shown that by combining forces, healthcare providers can create significant efficiencies, including procuring state-of-the-art equipment and improving service integration for patients.
Rich and densely populated regions are more likely to see these benefits. Multiple hospital and doctor systems exist in these communities, so one system can buy a hospital or doctor’s office, generate efficiencies, and provide better care without materially affecting competition.
These dynamics are not always true in underserved areas, namely in rural communities, city centers and tribal communities. Residents of these communities often have fewer options.
In these areas, a merger of hospitals or medical practices can also facilitate the improvement of health care services. But, given the lack of competition already, the FTC has opposed it as part of its mission to enforce the country’s antitrust laws.
This has led to a crucial question for the FTC, as well as for courts reviewing the validity of FTC actions: Can the tangible health care benefits ever outweigh the harms to competition and tip the balance in favor of such a merger?
Courts reject mergers with no regard for patients
Some courts answer this question with a resounding “no”. They won’t even consider the benefits of a merger. In these courts, the actual outcome of a merger – whether it may have a positive or negative impact on a community – is irrelevant.
The United States Court of Appeals for the Ninth Circuit explained this view in 2015 when overturning a merger in Idaho in FTC vs. St. Luke’s Medical Center. In this case, the trial court evaluated the proposed merger between a large local medical practice and the Idaho hospital and concluded that it would increase integrated medicine and improve care.
Nevertheless, the court invalidated the merger. The Ninth Circuit said, “It is not enough to show that the merger would [the hospital] to better serve patients. The only concern of the courts was that it would reduce competition in an area where there was already little competition.
Other examples include the FTC’s opposition to hospital system mergers around Bismarck, ND (FTC vs. Sanford Health), and in central Pennsylvania (FTC vs. Penn State Hershey Medical Ctr.). US appellate courts in 2019 and 2016, respectively, allowed preliminary joinders sought by the FTC against the two mergers.
In the Pennsylvania case, the Third Circuit also overruled lower court rulings that the merger would benefit patients, saying it was unsure whether courts were even allowed to consider those benefits, whatever their importance and reality.
Fortunately, not all courts agree with this approach. In other U.S. circuit courts, healthcare providers are allowed to rebut an antitrust complaint. They must show that post-merger efficiencies are merger-specific, verifiable, and not the result of a reduction in services.
In some cases, merging is just an option
One of the concerns expressed by health care experts about turning a blind eye to the benefits of mergers for patients is that it belies the realities of health care in underserved communities. They warn of the negative effects on patient care of refusing a merger.
In September, the Journal of the American Medical Association published a to study on “Quality of care before and after mergers and acquisitions of rural hospitals”. He found that for some vendors, merging is the only option to avoid closure. They face “declining populations, worsening economic conditions and persistent clinician shortages, which put them at greater risk of closure than their urban counterparts.”
Likewise, a to study of the North Carolina Rural Health Research Program at UNC found that 138 rural hospitals have closed since 2010. Additionally, a 2018 Pew Research Center survey found that nearly a quarter of Americans in rural areas say access to good doctors and hospitals is a pressing issue for them.
Some people suspect, however, that mergers will solve this problem. They say the mergers will lead to higher prices and the claimed benefits of the merger will never materialize. These concerns are valid.
Not all mergers of hospitals and medical practices, in suburban or underserved areas, prove beneficial to patients. But some will, and many will.
The key is to ensure that the FTC and the courts have and use the tools to distinguish mergers that benefit consumers from those that do not.
Is change on the horizon?
Hopefully there is a window for change. Late last month, the FTC issued a information request on merger enforcement, asking people to comment on how the agency can modernize its enforcement practices.
In this age of political polarization, Democrats and Republicans should agree that it doesn’t make sense for the federal government to interfere in the health care market in ways that reduce or impede improved access. to quality care.
The best approach is for the FTC — and the courts — to weigh the benefits of a merger, and then hold the parties accountable for ensuring those benefits are real and delivered to patients in local communities.
Ultimately, the goal is to have the best health care system, and the FTC and the courts should not blindly stand in the way of progress.
This article does not necessarily reflect the views of the Bureau of National Affairs, Inc., publisher of Bloomberg Law and Bloomberg Tax, or its owners.
Phil Goldberg is Managing Partner and Co-Chair of the Public Policy Practice Group and Kateland Jackson is a partner in the Public Policy Group of Shook Hardy & Bacon LLP. Goldberg previously worked for a Democrat who served on the House Judiciary Committee, and Jackson worked for a Republican on the Senate Judiciary Committee.