Courts, FTC Should OK Health Mergers That Help the Underserved

When most Americans go to the doctor or hospital, they have one thing on their minds: They want the best care possible. For some Americans, a law having nothing to do with health care may end up getting in their way.

President Biden last summer instructed the Federal Trade Commission to be active in opposing mergers that harm competition, and the FTC immediately issued a press release cautioning, “Hospital executives hatching merger plans should take note.”

The FTC’s finger-wagging might make sense if mergers in the health-care arena were always at odds with quality care. They are not. Some mergers have real benefits for patients, and the FTC should amend its practices and look to facilitate those benefits.

In recent years, hospitals and physician groups have been increasingly joining forces to overcome escalating costs of providing care. Experience has shown that by combining forces, health-care providers can create significant efficiencies, including affording state-of-the-art equipment and better integrating services for patients.

Wealthy, densely populated areas are more likely to see these benefits. Multiple hospital and physician systems exist in these communities, so a system can purchase a hospital or physician practice, generate efficiencies and provide better care without materially affecting competition.

These dynamics are not always true in underserved areas, namely in rural, inner city, and tribal communities. Residents in these communities often have fewer options.

In these areas, a merger between hospitals or physician practices may also facilitate improved health-care services. But, given the lack of competition already, the FTC has been opposing them as part of its mission to enforce the nation’s antitrust laws.

This has led to a critical question for the FTC, as well as courts reviewing the validity of FTC actions: Can tangible health-care benefits ever outweigh harm to competition and tip the scales in favor of allowing such a merger?

Courts Reject Mergers With No Regard for Patients

Some courts answer this question with a resounding, “No.” They won’t even look at the benefits of a merger. In these courts, the real life outcome of a merger—whether it can have a positive or negative impact on a community—is irrelevant.

The U.S. Court of Appeals for the Ninth Circuit explained this view in 2015 in striking down a merger in Idaho in FTC v. St. Luke’s Medical Center. In that case, the trial court assessed the proposed merger between a large local medical practice and the Idaho hospital and found it would increase integrated medicine and improve care.

Nevertheless, the court struck down the merger. The Ninth Circuit said, “It is not enough to show that the merger would allow [the hospital] to better serve patients.” The sole concern for the courts was that it would reduce competition in an area where there already was little competition.

Other examples include FTC opposition to mergers of hospital systems around Bismarck, N.D. (FTC v. Sanford Health), and in central Pennsylvania (FTC v. Penn State Hershey Medical Ctr.). The U.S. appellate courts, in 2019 and 2016 respectively, allowed the preliminary junctions sought by the FTC against both mergers.

In the Pennsylvania case, the Third Circuit also set aside a lower court’s determinations that the merger would benefit patients, saying it was not sure courts were even allowed to consider these benefits—again, regardless of how important and real they may be.

Fortunately, not all courts agree with this approach. In other U.S. circuit courts, health-care providers are allowed to rebut an antitrust claim. They must show the post-merger efficiencies are merger-specific, verifiable, and not the result of a reduction in services.

In Some Cases, Merger Is Only Option

One concern health-care experts have voiced with turning a blind eye to patient benefits of mergers is that it belies the realities of health care in underserved communities. They are cautioning against the adverse impacts on patient care from denying a merger.

In September, the Journal of the American Medical Association published a study on the “Quality of Care Before and After Mergers and Acquisitions of Rural Hospitals.” It found for some providers, merger is the only option to avoid closure. They are facing “declining populations, worsening economic conditions, and persistent shortages of clinicians, putting them at greater risk of closure than their urban counterparts.”

Similarly, a study from the North Carolina Rural Health Research Program at UNC found that 138 rural hospitals have closed since 2010. Also, a 2018 Pew Research Center survey found that nearly a quarter of Americans in rural areas say that access to good doctors and hospitals is a pressing problem for them.

Some people are suspicious, however, that mergers will solve this problem. They say mergers will lead to higher prices and the claimed benefits of the merger will never materialize. These concerns are valid.

Not all hospital and physician practice mergers—in suburban or underserved areas—turn out to be beneficial to patients. But some will, and many can.

The key is making sure the FTC and courts have and use the tools to distinguish between the mergers that benefit consumers from those that do not.

Is Change on the Horizon?

Hopefully, there is a window for change. At the end of last month, the FTC issued a request for information on merger enforcement, asking people to comment on how the agency can modernize its enforcement practices.

In this age of political polarization, Democrats and Republicans should agree that it makes no sense for the federal government to interfere in the health-care market in ways that reduce or impede improved access to quality care.

The better approach is for the FTC—and courts—to weigh the benefits of a merger and then hold the parties accountable for making sure these benefits are real and provided to patients in the local communities.

At the end of the day, the goal is to have the best health-care system, and the FTC and courts should not blindly stand in the way of progress.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Phil Goldberg is managing partner and co-chair in the Public Policy Practice Group and Kateland Jackson is an associate in the Public Policy Group at Shook Hardy & Bacon LLP. Goldberg previously worked for a Democrat who served on the House Judiciary Committee, and Jackson worked for a Republican on the Senate Judiciary Committee.