The Federal Trade Commission (FTC) is challenging two hospital acquisitions, one in Ohio and another in Georgia that's currently under review by the U.S. Supreme Court, and the outcomes may establish precedent for post-health reform provider consolidation.
In April, the FTC ordered Toledo-based nonprofit health system ProMedica to dissolve its ownership of St. Luke's Hospital, in Maumee, Ohio, after the commission found that ProMedica's 2010 acquisition "was anticompetitive" and likely to lead to lead to increased reimbursement rates for general acute-care inpatient hospital services and inpatient obstetric services covered under commercial health plans.
The acquisition brought the number of health systems in greater Toledo to three, and ProMedica is now appealing the decision in the 6th Circuit Court of Appeals, having acquired St. Luke's under a temporary agreement during the FTC's investigation.
The FTC says that ProMedica has some of the highest reimbursement rates in Lucas County, which is home to about 440,000 people in and around Toledo. The FTC maintains that the merger would see ProMedica serving 60 percent of the regional acute-care inpatient market and about 80 percent of the inpatient obstetric services market.
ProMedica has 11 hospitals and health systems throughout western Ohio and also offers an HMO health plan that has a roughly 75 percent HMO market share in greater Toledo, according to the American Medical Association's analysis of insurance markets.
The case is one of the more of the watched disputes in healthcare and may signal how the Obama Administration's FTC plans to approach provider M&A activity now that health reform is underway. Provider advocacy groups like the American Hospital Association say health system consolidation is natural and is necessary for new payment and delivery models and to achieve economies of scale in health information systems.
But in an amicus brief filed in support of the FTC, America's Health Insurance Plans (AHIP) argues provider consolidation has been deleterious for both consumers and insurers: "Just as anticompetitive consolidation has been recognized to have a chilling effect on innovation in many other markets, such consolidation among hospitals is likely to reduce and perhaps foreclose innovative collaborations between plans and provider."
AHIP also argues in the brief that local and regional health IT systems can work efficiently in partnership with insurers, not only through the health systems' economies of scale. For instance, AHIP, in partnership with insurers like Aetna, Cigna and Humana, is exploring the idea of creating regional web portals for physician offices to digitally manage eligibility, billing and referrals.
[See also: Report links costs with provider consolidation]
Another provider merger case is currently under review by U.S. Supreme Court -- one a bit more obscure, involving a sort of home rule question of state government-granted exemptions to antitrust law.
The case involves the FTC's repeated challenge of Phoebe Putney Health System's acquisition of Palmyra Park Hospital, in central Georgia. The deal was made through the Hospital Authority of Albany-Dougherty County, a state state-sanctioned corporation that leases hospitals on long-term contracts, and the FTC it could lead to Phoebe Putney controlling 85 percent of the regional market.
The 11th Circuit Court of Appeals had rejected the FTC's appeals, ruling that the purchase was exempt from federal antitrust intervention because the acquisition -- and the subsequent consolidation -- was approved through a state entity.
Seth Waxman, a former U.S. solicitor general representing Phoebe Putney and the Hospital Authority, told the Supreme Court in early November that the acquisition is in the public interest. Given the "build or buy" choice, he said, the acquisition gives the hospital a better economy of scale in providing care to low-income patients.