iProtean—FTC Orders Unwinding of Merger Between Health System and Physician Group

Last week we reported on a new report that found no conclusive relationship between hospital consolidation and price increases in a community. There is a new wrinkle, however. A hospital or system merger with a large physician group practice may not pass the competition/price increase test. In Idaho last month, a district judge sided with the Federal Trade Commission (FTC) and ordered the unwinding of a merger between St. Luke’s Health System and the Saltzer Medical Group. (“Health Law Goals Face Antitrust Hurdles,” The New York Times, February 2, 2014)


Legal analysts say the decision illustrates that “even though consolidation can lead to greater coordination and improved patient care, the FTC and state attorneys general will not hesitate to oppose consolidation in highly concentrated markets they believe will lead to the reduction in competition, creating the potential for increased prices.” (FTC Wins Antitrust Challenge to Health System’s Acquisition of Physician Practice, Crowel Moring, February 4, 2014)


St. Luke’s general counsel told the New York Times reporter that the acquisition of the medical group was necessary to provide more coordinated care at a lower cost to the community. The judge noted, however, that even if the merger had improved patient outcomes, the health system would be able to demand higher reimbursement rates from health insurers and actually raise rates for some services, ultimately pushing up costs for consumers through higher insurance premiums.


Analysts noted the potential impact on the Affordable Care Act (ACA). Hospitals have been merging with or acquiring physician group practices to better position themselves for taking care of large pools of patients and improving patient care. The mergers also improve the hospitals’ bargaining power with health insurers.


This type of merger could achieve the goals of the ACA by addressing concerns over cost and quality through integration of primary care physicians with teams of specialists to achieve common goals for patients. Accountable care organizations (ACOs) also influence the desire to merge.


But “vertical integration” also raises competitive/antitrust concerns for the legal community. Analysts note that in the future, the government may not hesitate to enforce antitrust laws against ACOs when their activities are deemed to have an anticompetitive effect. “This in turn could lead to a loss of enthusiasm for this popular government program.” (FTC Wins Antitrust Challenge to Health System’s Acquisition of Physician Practice, Crowel Moring, February 4, 2014)

iProtean subscribers, a new advanced Quality course will soon be in your library. Look for The Importance of Physician Leaders featuring Brian Wong, M.D., Todd Sagin, M.D. and Tom Atchison, Ph.D. later this month.


For a complete list of iProtean courses, click here.

For more information about iProtean, click here.