Feb 27, 2020 - Health

FTC sues to block Philadelphia hospital system merger

Blue Thomas Jefferson University hospital sign attached to the brown hospital building.

Jefferson Health's flagship hospital in Philadelphia. Photo: Jefferson Health

The Federal Trade Commission and Pennsylvania's attorney general want to block the proposed merger between Jefferson Health and Einstein Health Network, arguing the combined system would control too much of the hospital services market in the Philadelphia area and consequently would have unfair pricing power.

Why it matters: This is the first time in more than three years that the FTC has challenged a large hospital merger, and this action could force Jefferson and Einstein to abandon their plans.

Flashback: The FTC hasn't opposed a major hospital merger since 2016, when it urged Tennessee and Virginia officials to block the merger between Mountain States Health Alliance and Wellmont — a deal that ultimately went through and created what's known today as Ballad Health.

  • The FTC hasn't formally challenged hospital mergers in court since 2015, when it went on a spree against hospitals deals in West Virginia, Pennsylvania and Illinois. Two of those three merger proposals ultimately folded.

What they're saying: Jefferson and Einstein would control 60% of inpatient services in northern Philadelphia and at least 70% of inpatient rehab services in the broader Philadelphia area, the FTC said.

  • The systems sent a statement saying they believe they have a "strong and comprehensive case" as to how the merger would benefit patients and not reduce competition.
  • A trial will start in September.

Between the lines: Jefferson and Einstein would have about $6.5 billion in annual revenue, according to financial filings. The system's footprint would be large enough around Philadelphia that health insurers may have a hard time excluding it from networks, regardless of what the system charges.

  • And given that hospital mergers usually lead to higher prices and no improvement in care quality, the FTC believes patients in the area would be getting a particularly raw deal.

The bottom line: The FTC hasn't challenged a lot of hospital mergers lately, even though there has been a lot of deal-making, but it has a decent track record of winning.

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