News & Insights

Client Alert

November 30, 2018

FTC Closes Its Investigation Into Hospital Merger After Massachusetts Attorney General Settlement


The Federal Trade Commission voted unanimously to close its investigation into the proposed merger of two health systems in eastern Massachusetts.  The proposed transaction would bring together the Care Group, Inc., the parent company of Beth Israel Deaconess Medical Center, Mount Auburn Hospital, and New England Baptist Hospital with the Lahey Health System, Inc., Seacoast Regional Health System, and BIDCO Hospital, LLC.

The parties negotiated a settlement with the Massachusetts Attorney General’s Office that would cap prices for seven years, mandate participation in the state’s Medicaid and Children’s Health Insurance Program MassHealth, and require $71.6 million in investments supporting healthcare services for low-income and underserved communities in Massachusetts. The $71 million investment includes $41 million to fund and support affiliated community health centers and safety net hospitals, $8.8 million in additional financial support for affiliated community health centers, $5 million to expand access to health care for communities of color and low-income communities and $16.9 million to improve access to mental health and substance use disorder treatment. The parties must also engage a monitor to ensure compliance with the settlement.

The FTC issued a statement explaining its reasons for closing its investigation, noting that the decision “whether to take an enforcement action was a close call” but that the “Commission does not typically pursue behavioral remedies in merger cases.”  Interestingly, the Commission noted that this transaction may provide a good opportunity for a retrospective study of merger effects, including the effects of efficiencies suggesting that it may keep a close eye on this market.

Takeaways

Hospital providers should note that even if the FTC decides not to pursue an enforcement action, a transaction may still be subject to state antitrust action.  In addition, state antitrust concerns may be able to be addressed through behavioral remedies rather than divestiture in contrast to  the federal antitrust agencies who will generally seek structural relief  to address antitrust concerns arising from hospital system consolidation.  The FTC in particular has been reluctant to accept behavioral remedies to resolve competitive concerns in mergers because such remedies can be difficult to structure and hard to oversee since the Commission lacks the resources to monitor such arrangement effectively.  The Antitrust Division of the Department of Justice historically has been more willing to accept such remedies but more recently has stated that the division will cut back on behavioral commitments and rely more on structural relief to remedy merger concerns.