April 29, 2016 Articles

What Healthcare Litigators Can Learn from FTC's Recent Challenges to Provider Mergers

A look at the FTC's four most recent challenges to healthcare mergers.

By Andrew Kasper

Many observers predicted the Patient Protection and Affordable Care Act of 2010 (ACA) would create a wave of consolidation in the healthcare sector. Robert Pear, “As Health Law Spurs Mergers, Risks Are Seen,” N.Y. Times, Nov. 21, 2010, at A1. The act created strong incentives for private payers to control the growth of healthcare costs. These incentives drive insurers to try to enhance their market share in order to increase bargaining leverage with healthcare providers. Insurers’ pursuit of deeper discounts in turn encourages providers to merge or jointly contract to gain additional leverage in negotiations with payers. The ACA also facilitated the development of new provider care and payment mechanisms—like accountable care organizations—that encourage closer provider coordination and consolidation.

In the six years since President Obama signed the ACA into law, the concerns regarding health sector consolidation have proven justified, with 95 hospital mergers occurring in 2014 alone. Marty Makary, “The Obamacare Effect: Hospital Monopolies,” Wall St. J., Apr. 19, 2015. Moreover, in 2015, health insurers Aetna and Humana announced plans to merge, as did insurers Anthem and Cigna. Andrew Kasper, “Mergers Should Be Presumed Likely To Enhance Market Power, AMA Says,” Health Law Litig., Sept. 11, 2015. The wave of consolidation in the healthcare sector has been accompanied by an uptick in the number of healthcare provider mergers challenged by the Federal Trade Commission (FTC), with the agency lodging challenges to four health sector mergers in the past six months alone. These renewed efforts come on the heels of the FTC’s successful challenge to the consummated merger between a hospital and multispecialty physician practice in Idaho. St. Alphonsus Med. Ctr.—Nampa Inc. v. St. Luke’s Health Sys., Ltd., 778 F.3d 775 (9th Cir. 2015). This article analyzes the FTC’s four most recent challenges to healthcare mergers, offering a few key takeaways for practitioners.

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