Einstein-Jefferson Healthcare Merger On After FTC Drops Challenge

A proposed healthcare merger between Philadelphia, Pennsylvania- based Einstein Healthcare Network and Jefferson Health in Pennsylvania and New Jersey has cleared the “final hurdle” now that the federal government has dropped a lawsuit challenging the deal, the academic medical centers recently announced.

FTC will no longer challenge the proposed $599 million merger deal, “posing no further barriers for the two historically linked academic medical centers to combine efforts to advance their shared healthcare mission in the region,” the centers stated.

The deal, first announced in 2018, would combine hospitals to create an 18-hospital system throughout Pennsylvania and New Jersey that would also bring together MossRehab and Magee Rehabilitation, two highly ranked rehabilitation hospitals.

FTC, along with the Commonwealth of Pennsylvania, issued an administrative complaint challenging the proposed merger last year, citing reduced competition for key healthcare services including general acute care.

Jefferson would have own least 60 percent of inpatient general acute care services in North Philadelphia and at least 45 percent of general acute care services in Montgomery County, as well as at least 70 percent of the inpatient acute rehabilitation services in the Philadelphia area, according to the complaint.

Payers in the area would not be able to find alternative providers for the identified services in the areas, potentially leading to higher prices for the services, the Commission argued in the lawsuit.

The challenge, however, has faced several setbacks in court, including a federal district court throwing out the case in December 2020 because the FTC failed to convince a judge that payers would have to increase prices because of the merger.

The FTC recently decided in a 4-0 vote recently released on its website that it will dismiss an appeal of the decision.

The healthcare merger is now expected to close within the next six months, according to the academic medical centers.

“Two non-profit, anchor institutions coming together to preserve access to care and do the right thing by the residents of Philadelphia is a creative solution to ensure Einstein doesn’t face the same fate as Hahnemann University Hospital,” Stephen K. Klasko, MD, MBA, president of Thomas Jefferson University and CEO of Jefferson Health, said in the announcement. “It’s a milestone victory for the city of Philadelphia and for those patients and families we proudly serve.”

Hahnemann University Hospital in Philadelphia closed in 2019 after facing financial difficulties. The closure of the 496-bed teaching hospital created access to care concerns among local provider organizations like Jefferson, which offered to purchase the hospital at the time in a deal that never closed.

FTC has been leery of healthcare mergers and acquisitions lately, even sending orders to six major private payers earlier this year to study the impact physician practice and healthcare facility mergers impact competition.

Healthcare merger and acquisition activity, however, has been down slightly since the start of the COVID-19 pandemic. There were still 79 announced transactions in 2020 though, down from 92 the previous year, Kaufman Hall reports.

This slump in activity is likely to be temporary though, the consulting firm explained, as the pandemic creates the “need for strategic initiatives that address the opportunities of industry transformation and that reward well-thought-out alignment opportunities.”

For Einstein’s interim president and CEO Ken Levitan the merger means improving health education and research opportunities.

"We are excited to have Einstein and Jefferson come together, as our shared vision will enable us to improve the lives of patients, the health of our communities and enhance our health education and research capabilities," Levitan said in the announcement. "By bringing our resources together, we can offer those we care for - particularly the historically underserved populations in Philadelphia and Montgomery County – even greater access to high-quality care.”