Two Healthcare Mergers Abandoned Following Pushback from FTC

Pushback from the Federal Trade Commission (FTC) has led to the termination of two proposed healthcare mergers, one in New Jersey and the other in Utah.

At the beginning of June, FTC filed complaints to block the mergers between RWJBarnabas Health and Saint Peter’s Healthcare System in New Jersey and HCA Healthcare and Steward Health Care System in Utah.

RWJ and Saint Peter’s were the first to call off their transaction. RWJ had planned to acquire Saint Peter’s, but FTC voted 5 to 0 to file an administrative complaint to block the acquisition on June 2, 2022.

The antitrust agency alleged that the deal would harm competition and increase concentration for general acute care services in Middlesex County, New Jersey. The complaint stated that the merger would leave payers and patients with fewer, less attractive alternatives.

The two health systems are located less than a mile from each other and are the only two hospitals in New Brunswick.

“With combined shares of approximately 50 percent for inpatient general acute care services in Middlesex County, New Jersey, the transaction was presumptively unlawful and would have resulted in higher prices and lower quality of care for New Jersey residents,” Holly Vedova, director of FTC’s Bureau of Competition said in a statement.

Shortly after the New Jersey health systems called their merger off, HCA Healthcare and Steward Health Care System did the same.

“For the second time in a week, parties who proposed an anticompetitive hospital merger have called their deal off after the FTC filed a complaint to block the deal,” Vedova said in a separate statement. “This transaction, like the RWJBarnabas Health/Saint Peter’s transaction that was abandoned two days ago, should never have been proposed in the first place.”

HCA Healthcare announced plans to acquire Steward Health Care System’s five Utah hospitals in September 2021.

FTC’s complaint against the acquisition alleged that the deal would reduce the number of healthcare systems offering inpatient general acute hospital service in the Wasatch Front region of Utah. In addition, the transaction would have increased market concentration in an already highly concentrated market and eliminated Steward Health Care System as a low-cost competitor, the complaint stated

If the proposed merger had gone through, it would have combined the second- and fourth-largest healthcare systems in the Salt Lake City area. This would have led to higher prices, less innovation, and lower quality care for patients, according to FTC.

“This should be a lesson learned to hospital systems all over the country and their counsel: the FTC will not hesitate to take action in enforcing the antitrust laws to protect healthcare consumers who are faced with unlawful hospital consolidation,” Vedova added.

While antitrust agencies frequently oppose healthcare mergers due to competition concerns, hospital groups have called on FTC and the Department of Justice (DOJ) to revise their merger guidelines.

For example, the Federation of American Hospitals (FAH) urged the agencies to recognize the quality improvements that can result from hospital mergers instead of focusing only on financial or price efficiencies.

The American Hospital Association (AHA) also asked FTC and DOJ to do more to challenge anticompetitive mergers and deceptive conduct from health plans.