CHICAGO – Two Illinois-based not-for-profit healthcare systems dropped their merger plans Tuesday following a court ruling that favored the Federal Trade Commission's efforts to block the union.
U.S. District Court Judge Jorge Alonso on Tuesday granted the FTC's request for a preliminary injunction temporarily blocking the merger of Advocate Health Care and NorthShore University HealthSystem while administrative proceedings proceed.
The systems then announced their decision to drop their fight.
"The FTC is delighted with today's district court ruling, which enjoined this merger, and the parties' subsequent decision to abandon the transaction," Tad Lipsky, acting director of the FTC's Bureau of Competition, said in a statement. "Advocate and NorthShore's merger would likely have reduced the quality, and increased the cost, of health care for residents of the North Shore area of Chicago."
A written ruling was not available. The 7th Circuit Court of Appeals panel in Chicago in October tossed Alonso's June ruling rejecting the FTC's request for a preliminary injunction as it pursued an administrative anti-trust action. The FTC argued the merger would harm consumer pricing and violate anti-trust rules.
The appeals court found flaws in the district's court's findings on how the merger would impact local competition. The opinion remanded the case to the district court level for further review and the merger remained enjoined pending reconsideration of the preliminary injunction motion -- which was granted Tuesday.
"We have determined with the Advocate Health Care leadership that the time, cost, and uncertainty of pursuing any additional appeals would not be worthwhile," NorthShore University HealthSystem's chief executive officer Mark Neaman wrote to employees in a letter issued after the ruling.
The systems' decision marks the latest victory for the FTC and the final development in a saga being closely watched by the not-for-profit healthcare sector because the FTC has amplified its scrutiny of mergers that were pursued as a result of federal healthcare reform.
The FTC challenges also add to growing worries over the impact of the Trump administration and congressional Republicans' plan to repeal and replace the Affordable Care Act.
The two systems first announced the union in September 2014. The FTC and state moved to block it with the filing of an administrative complaint in December 2015 over concerns the combined system would control more than 50% of general acute care inpatient hospital services in the Chicago North Shore area. The systems countered that the FTC's concerns were inflated and services and pricing would not be harmed but improved.
Both Illinois systems carry double-A level ratings and the rating agencies had taken a positive view of the proposed merger. Advocate already is the largest not-for-profit healthcare system in the state.
Advocate is the larger of the two with 12 hospitals and more than $1 billion of debt outstanding while NorthShore operates four hospitals and has about $300 million of debt.
The merged entity would have been known as Advocate NorthShore Health Partners.
The FTC's action marked the latest in a series of merger challenges spurred by antitrust worries. Penn State Hershey Medical Center and Pinnacle Health System recently dropped their plans to merge over concerns of a prolonged battle.
