A federal judge has signed off on federal regulators' request to temporarily block a merger of two Chicago area hospital systems, until Chicago's federal appeals court can weigh in on the district judge's refusal to grant a preliminary injunction to prevent the consummation of the deal to combine the Advocate and NorthShore health systems.
Saying it would be all but impossible to “unscramble the
eggs” should two suburban Chicago health systems be allowed to merge, federal
regulators and Illinois’ attorney general had asked U.S. District Judge Jorge Alonso – who just
two days earlier expressed doubts about the regulators’ ability to prevail in
the case - to slap a hold on the merger between Advocate and
NorthShore University health systems, pending the outcome of the government’s
Advocate Christ Medical Center
On June 16, the Federal Trade Commission and Illinois
Attorney General Lisa Madigan filed a motion with Alonso in Chicago federal court, asking the judge to impose an injunction for
the time being, at least until the U.S. Seventh Circuit Court of Appeals has a
chance to weigh in on the regulators’ challenge to the hospital systems’ deal.
Alonso signed off on that request on June 17.
The FTC and Madigan’s office had filed on June 15 a notice
of their intent to appeal Alonso’s denial of their request for a preliminary
injunction blocking the merger, while the court mulls the government’s
antitrust action against Advocate and NorthShore. Alonso had issued that order,
denying the injunction, on June 14.
“Plaintiffs respectfully submit that the Court’s denial of
Plaintiffs’ motion raises serious, substantial legal issues for the Court of
Appeals to resolve,” the government plaintiffs wrote in their June 16 motion. “An
injunction pending appeal is necessary to preserve the status quo, which would
otherwise be irreparably altered if the merger occurs during appellate review.
Indeed, courts have recognized that it would be difficult, if not impossible,
for the FTC to ‘unscramble the eggs,’ i.e., unwind a consummated transaction
once the merging parties begin to consolidate operations.”
The FTC and Madigan said the prompt action was needed to
give the Seventh Circuit time to respond to the regulators’ appeal, as a
temporary restraining order issued by Alonso in late 2015 would allow Advocate
Health to complete its merger with NorthShore University Health System four
business days following a denial of the government’s preliminary injunction
request – which, in this case, would be at 12:01 a.m. on June 20.
On June 14, Alonso had denied the regulators’ request, saying
in a short order he believed the FTC had “not met their burden of showing that
there is a likelihood that they will succeed on the merits of their antitrust
That order had, in turn, followed months of legal
proceedings, including six days of hearings, in which the judge considered
witness testimony and evidence presented by both sides, as well as that of a
list of intervenors that included a number of other health care systems and
insurers in northern Illinois.
The FTC’s case hinged on its assertion that the merger
between the Downers Grove-based Advocate and Evanston-based NorthShore would
harm consumers, by giving the 17-hospital combined health care company that
would result too large a slice of the local market and allowing the cost of
health care services to rise from the alleged lack of competition.
In response, Advocate and NorthShore argued the FTC’s
analysis of the local market was flawed, and did not fully take into account
the amount of competition the new health system faces in the region,
particularly from Northwestern Medicine, which now operates in Cook, DuPage,
Kane and DeKalb counties, and could soon expand to McHenry County, as well. Nor
did the regulators fully address the price-fixing power held by regional
insurers, and particularly Blue Cross Blue Shield, the health systems said.
The Seventh Circuit’s online docket did not indicate if that
appeals court would expedite its consideration of the case, instructing the FTC
and Madigan to submit a brief by July 25.