CHICAGO – The decision by a Chicago federal court not to
block a merger between Advocate and NorthShore University health systems may be a
glimpse into a trend under which market pressures will push more hospitals to merge in order to
survive, a health care
U.S. District Judge Jorge Alonso earlier this month denied the Federal
Trade Commission's request for a preliminary injunction against the
proposed merger of the Advocate and NorthShore University health care systems. Alonso did, however, grant a request by the FTC and Illinois Attorney General Lisa Madigan to
temporarily put the merger on hold until the U.S. Seventh Circuit Court of
Appeals in Chicago can decide whether Alonso's order should stand. Lawyers for the health systems have asked the Seventh Circuit to expedite briefings in the case, potentially allowing the appeal process to be wrapped up by the end of July, clearing the way for the merger to proceed.
“The health care landscape has changed profoundly in recent
years, partly because of the Affordable Care Act, but mostly because of market
pressures on hospitals,” said Norman G. Tabler Jr., counsel at Faegre Baker Daniels, in Indianapolis. “I
think – and this is just my opinion – that the tide has shifted or at least is
in the process of shifting.”
In May, a federal judge in Pennsylvania also rejected the FTC’s request for a preliminary injunction in connection with a hospital merger agreement in central Pennsylvania, making Alonso's denial of the FTC's injunction request the second loss for the FTC at the district court level this year.
Tabler said the ruling in the Advocate/NorthShore
merger likely does not create a game plan for other hospitals and health
systems to successfully fight off future FTC attempts to block mergers.
Instead, Tabler said the district court ruling “reinforces
the truth that, in order to prevail, hospitals need to show that the merger
will not harm patients by driving up prices, and will actually lower them.”
Tabler said the judge’s ruling reflected a belief that the
FTC could not prevail in its antitrust action at the trial level in proving
that the merger would harm competition and drive up health care prices.
“(Alonso) probably accepted the hospitals’ argument that the FTC had
defined the geographical market too narrowly and that the market should be
defined more broadly, and therefore include more hospitals,” Tabler said. “He
may also have accepted the hospitals’ argument that together they could offer a
health insurance plan at premiums lower than the premiums of any other plans in
Despite the ruling, Tabler said the Advocate/NorthShore
merger is not free and clear to proceed. Specifically, Tabler said that because
the court denied the FTC’s request for an injunction, the hospitals may
proceed, “but there is some risk, at least until the FTC formally drops the
“The risk is that if they proceed with the merger and then
the government takes action and succeeds, they could find themselves in the
position of having to unscramble the omelet,” Tabler said. “That rarely
happens, but sometimes it does.”
Tabler said more mergers can be expected, not only involving
just hospitals, but also hospital acquisitions of physician practices, under which physicians become employees of the hospitals. He said the market could also see health insurance companies combine with hospitals, or hospitals create their own health
insurance companies - as Advocate and NorthShore have proposed.