Illustration: Lazaro Gamio/Axios
BJC HealthCare of St. Louis and Saint Luke's Health System of Kansas City said that they are exploring a merger that could create a 28-hospital academic health system valued at around $10 billion.
Why it matters: The combined company has little geographic overlap, which seems to be key for U.S. hospital operators that want to expand (and cut costs) without attracting antitrust attention.
- The most recent example was California-based Kaiser reaching into Pennsylvania for Geisinger, although that merger has not yet closed.
Be smart: The Federal Trade Commission will still dig into the deal from a competition standpoint, Epstein Becker Green antitrust attorney Patricia Wagner tells Axios.
- "Sometimes there are other considerations that the FTC may be looking at that gives them pause," she says.
- "What the health plans are saying or whether hospitals are expanding into other regions, so they're not quite as far apart as you might think initially."
Between the lines: Nonprofit hospital mergers are mission-driven — meaning antitrust remedies aren't as simple as selling off hospitals in overlapping geographies, Wagner says.
- "The mission of the organization is to provide services to people in the relevant communities," she says.
- That means that divestiture is usually not an option for nonprofit hospital system, she adds.
Yes, but: Regulators opted not to touch the huge Advocate Aurora Health-Atrium Health merger late last year.
What's next: Expect mega-mega mergers, with the next wave of hospital consolidation to be primarily at the health system level, says Epstein Becker Green health care transactional attorney Gary Herschman.
- "If you just focused on the major metropolitan areas ... They're all consolidated," he says. "So the next step is systems merging with systems to form mega health systems."
What we're watching: As hospitals grow, so too does their bargaining power — much to the chagrin of insurers, which may raise opposition with the FTC or DoJ.
The other side: "Multiple health policy researchers have warned that these deals are relatively understudied and, according to some prior analyses, very rarely translate to the quality and consumer cost savings often touted by health systems, says Dave Muoio at Fierce Biotech
