CHICAGO – The Federal Trade Commission plans to appeal a federal court judge's refusal to block the merger of Illinois-based Advocate Health Care and NorthShore University Health System.
The FTC moved last December to halt the proposed union citing anti-competition concerns. The agency filed an administrative complaint warning that the combined system would control more than 50% of the general acute care inpatient hospital services in the Chicago North Shore area.
The agency said such control would likely harm consumers – with rising healthcare costs and diminished incentives to upgrade services and improve quality.
The commission's attempt to win a temporary restraining order and preliminary injunction to prevent the merger and maintain the status quo pending an administrative proceeding was heard by the U.S. District Court for the Northern District of Illinois, Eastern Division in April. The systems countered that the FTC's concerns were inflated and services and pricing would not be harmed.
Judge Jorge Alonso in a decision announced Tuesday said the FTC failed to show "a likelihood" that it would "succeed on the merits of their antitrust claims." The formal ruling has not yet been published.
"The court's ruling is disappointing and we will be considering our options," the FTC's Bureau of Competition initially said in a statement. On Wednesday, the agency, joined by Illinois Attorney General Lisa Madigan, filed a notice of appeal with no additional comment.
"Judge Alonso's decision reaffirmed what we have wholeheartedly believed since day one —this merger is a big win for consumers and for health care in our country as the shift to value takes hold," Advocate president and chief executive officer Jim Skogsbergh said in a statement.
Both Illinois systems carry double-A level ratings and the rating agencies have taken a positive view of the proposed merger first announced in 2014. Advocate already is the largest not-for-profit healthcare system in the state.
The agreement outlines plans to consolidate balance sheets and boards of directors, as well as to have a unified mission, vision and strategy. The heads of each system will serve as co-chief executive officers for a designated period.
Advocate is the larger of the two with 12 hospitals and has more than $1 billion of debt outstanding while NorthShore operates four hospitals and has about $300 million of debt.
The new entity would be known as Advocate NorthShore Health Partners and operate 16 hospitals with more than $7 billion in annual revenues. The new system would serve three million patients annually.
The FTC's action marked the latest in a series of merger challenges spurred by antitrust worries. It previously moved to halt Cabell Huntington Hospital's acquisition of St. Mary's Medical Center in the Huntington, West Virginia area and Penn State Hershey Medical Center's merger with Pinnacle Health System.
A federal judge in Pennsylvania recently ruled against the FTC in its effort to half the Penn/Pinnacle merger but the FTC is pursuing an appeal.
Healthcare sector participants have been watching all the cases closely because they stand to impact future consolidation efforts which the industry argues are necessary to deal with demands of federal healthcare reform.