The U.S. Supreme Court has spoken. Or, in this case, it has made its opinion known by its silence. The court recently declined to hear an appeal of a case that has brought national attention to the Toledo, Ohio, market by forcing the dissolution of a major health system merger. In response, health systems across the country are surely taking notice as they consider strategies for building partnerships with other hospital and physician organizations.
Because it is easier for larger, integrated health systems to meet the Affordable Care Act's goals of increasing efficiency and quality for patients, there has been a tidal wave of deals among hospitals and health systems that want to partner with one another as a way to hopefully thrive in the new world of healthcare reform. But at the same time, the Federal Trade Commission is cracking down on mergers and acquisitions that it deems anti-competitive, and it is being vigilant in its oversight of many of these deals.
For nearly five years, the FTC and Toledo, Ohio-based ProMedica Health System have been battling in court over ProMedica's acquisition of St. Luke's Hospital, also in the Toledo market. Although each court and judge sided with the FTC, which deemed the merger anti-competitive, ProMedica continued to appeal the decisions, all the way to the U.S. Supreme Court. But now that the Supreme Court has declined to hear the case, the decision of the lower court stands, and ProMedica must divest St. Luke?s.
In Boise, Idaho, a similar scenario is playing out that involves a merger between St. Luke's Health System and Saltzer Medical Group. The FTC ruled that St. Luke's 2012 acquisition of the major physician group violates antitrust laws and ordered the hospital to unwind the deal. Although St. Luke's has continued to appeal the decision, just like ProMedica, the courts continue to rule in favor of the FTC.
These two cases, though both in relatively small markets, have attracted national publicity because of the implications for hospitals throughout the country. The arguments that a merger will lead to better patient outcomes, or will benefit a struggling hospital or physician group, must be proven by the merging entities, since these reasons are increasingly being called into question.
Health systems will likely continue to seek relationships with other health systems and hospitals, but will do so in a way that avoids scrutiny from the FTC. By forming looser affiliations?not outright mergers and acquisitions?hospitals can still benefit from closer relationships, but without attracting the attention of the FTC since the entities aren?t legally joined.
There has been an uptick in these types of loose relationships between entities in recent years?often called strategic alliances or affiliations?and we expect this trend to continue. Looking ahead, we could see health systems becoming much more hesitant about even attempting mergers and acquisitions, especially as the FTC continues to ultimately come out on top in these high-profile cases.