FTC aggressively seeking to block provider consolidations while making way for ACOs

Agencies weigh the benefits of coordination against the risks of anticompetitive effects when ruling on accountable care organizations

For the past several years, the Federal Trade Commission (FTC) and the Department of Justice Antitrust Division (DOJ) have acted aggressively to protect competition in the health care industry. For example, the FTC has filed complaints to enjoin three separate proposed hospital consolidations in the last year.

 Interestingly, the Obama administration simultaneously has proposed and signed legislation that arguably reduces competition in health care by encouraging greater coordination among physicians and hospitals in the form of Accountable Care Organizations (ACOs). While the antitrust agencies’ aggressive enforcement in health care services and the passage of legislation aimed at encouraging greater coordination among providers may seem paradoxical, both have the same ultimate goal: lower health care costs and increased quality of care.  

Theoretically, a similar weighing of the efficiencies versus potential anticompetitive effects arising from a hospital consolidation takes place both before the FTC decides to issue a complaint to block such a consolidation and when a court is asked to rule on that complaint. The antitrust agencies have recently grappled with the challenge of enforcing the antitrust laws against health care providers while also seeking to encourage practices that improve health care quality and efficiency.

In the FTC’s recent challenges to three separate hospital combinations—ProMedica Health System/St. Luke’s Community Hospital, Phoebe Putney Health System/Palmyra Park Hospital, and OSF Healthcare System/Rockford Health System—the FTC argued that the asserted efficiencies were not strong enough to outweigh the reduction in competition from the transactions. The administrative law judge who weighed the efficiencies in the FTC’s challenge of the ProMedica and St. Luke’s joinder  considered the Respondent’s assertion of efficiencies in the form of capital contributions, cost savings and clinical improvements, but ultimately found that the likelihood of harm outweighed the asserted efficiencies.  

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Logan Breed

Logan Breed is a partner in the Washington D.C. office of Hogan Lovells, concentrating on antitrust clearance of mergers and acquisitions, antitrust litigation, and non-merger...

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Corey Roush

Corey Roush is a partner in the Washington D.C. office of Hogan Lovells, where he focuses on antitrust litigation, white collar criminal defense, corporate governance...

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Leigh Oliver

Leigh Oliver is an associate in the Washington D.C. office of Hogan Lovells, with a focus on antitrust and trade regulation law

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