Chicago Hospital Merger Falls Apart With Judge’s Injunction

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By Liz Crampton

Advocate Health Care and NorthShore University Health System abandoned their proposed merger March 7 after a district judge ruled the deal could be anticompetitive.

The Chicago hospitals’ withdrawal from the deal ends a long battle with the Federal Trade Commission and bolsters the government’s approach to hospital-merger enforcement. The FTC program has endured a rocky year in hospital mergers by losing two lawsuits at the district level. The agency wants to stop combinations of local hospitals that could raise the cost of inpatient or emergency care. Advocate and NorthShore’s actions signal to other hospitals how difficult it is to get mergers of close competitors through the courts, even if they can point to benefits gained from the deal.

A district judge on March 7 preliminarily blocked the proposed merger after first allowing the deal to proceed over the opposition of the FTC ( Federal Trade Commission et al v. Advocate Health Care Network et al, N.D. Ill., 1:15-cv-11473, 3/7/17 ).

Immediately after the judge issued his decision, NorthShore CEO Mark Neaman released a statement that the hospital has ended the deal.

“We have determined, with the Advocate Health Care leadership, that the time, cost, and uncertainty of pursuing any additional appeals would not be worthwhile,” the statement read.

The FTC has suffered losses on its hospital-merger analysis at the district court level, but its views have recently been redeemed by the U.S. Court of Appeals for the Third and Seventh Circuits. The Seventh Circuit in October reversed the lower court’s Advocate-NorthShore decision, leading to U.S. District Judge Jorge Alonso’s March 7 decision to grant an injunction. And in September, the Third Circuit reversed a Pennsylvania judge’s approval of a merger between two local hospitals that also faced FTC opposition. Those district court losses represented the first times the agency had been defeated after a long winning streak in hospital cases.

In the Advocate-North Shore case, the Seventh Circuit ruled that the lower court misapplied an economic test when determining the geographic area used to analyze the merger’s competitive impact. The case was sent back to Alonso for further review, who granted the FTC’s request for a preliminary injunction to stop the deal “in light of the guidance the Seventh Circuit has provided.”

According to the FTC, the merger would have lead to increased costs of general acute inpatient hospital services in the Chicago area.

The decision explaining the judge’s reasoning is under seal until the parties can agree to the redactions of confidential business information.

To contact the reporter on this story: Liz Crampton in Washington at lcrampton@bna.com

To contact the editor responsible for this story: Fawn Johnson at fjohnson@bna.com

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