Cook County Record

Monday, December 9, 2019

Court's injunction of Advocate, NorthShore merger could have future ramifications for health care industry

By Dawn Geske | Nov 10, 2016

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CHICAGO – A three-judge panel of the U.S. Court of Appeals for the Seventh Circuit has overturned the decision by a lower court, which had denied enjoining the proposed merger between two health-care providers in Illinois. And the decision could be a harbinger for future cases, said an attorney who deals with such antitrust litigation. 

Advocate Health Care Network and NorthShore University HealthSystem announced that they intended to merge to form Advocate NorthShore Health Partners, which would become the largest integrated health provider in the state. Advocate Health Care Network is one of the largest health-care providers in the Midwest with more than 250 health care faciltiies. NorthShore University HealthSystem operates Evanston, Glenbrook, Highland Park and Skokie hospitals and the NorthShore Medical Group.

While the lower court denied the Federal Trade Commission’s request to enjoin the merger between the two companies, on appeal the decision was reversed in the U.S. Court of Appeals for the Seventh Circuit.

A key factor in the FTC’s fight to stop the merger was the analysis of the geographic market and monopolist tests that consider the economic effects of the merger on a given geographic area.

“I think what succeeded on appeal was the FTC’s argument that merger analysis that is set forth in their guidelines was, in fact, the correct economic analysis that mirrored the realities of the hospital market in that area,” Leslie E. John, partner at Ballard Spahr LLP, told the Cook County Record.

The appeals panel found the FTC’s test was indeed correct and that a price increase would be evident to patients in the geographic area if the merger was to go forward. This means that the case will go back before the lower court to determine if the stay remains in place. If it does, then it will be determined whether the merger will go before the commission to hear the merits of the case.

Mergers of health care organizations are becoming more commonplace as they look to consolidate for cost measures and reduce the increasing amount of pressure that is placed on them through the Affordable Care Act.

“You see this trend of increasing consolidation and I do think it’s in reaction to the Affordable Care Act and in reaction to conditions more generally in these markets,” said John. “I think that has put hospitals and other medical providers under a lot of stress.”

This could cause friction between the FTC and local and state governments, as in some instances these mergers may benefit a community, but be anti-competitive in the larger picture of the FTC.

“I do think you’ll continue to see mergers that are supported at the state and local levels which the federal government, specifically the FTC, may not support,” said John. "I think you’re going to see areas of conflict there. You may see continued battles with the commission on one hand and local authorities on the other hand because, at the end of the day, patients want a certain quality of health care to be available to them.”

This could also mean changes in laws for consolidating health care systems as the FTC adjusts for the present conditions in the health care market.

“I do think that, as there are more mergers going up in front of the agency, we’ll continue to see development of the law and development of what is going to be a compelling scenario to the FTC,” said John.

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Ballard Spahr, LLPU.S. Court of Appeals for the Seventh Circuit