Markets Wired

Following the decision earlier this month by Advocate Health Care Network and NorthShore University HealthSystem to abandon their proposed merger, the Federal Trade Commission has dismissed its case challenging the transaction before the Commission’s administrative trial process.

FTC Acting Chairman Maureen K. Ohlhausen issued the following statement:

“Historically, the Advocate and NorthShore hospital systems competed vigorously to be included in health insurance companies’ hospital networks. Having reason to believe their merger would increase costs, and harm quality and innovation for patients and their families in the northern suburbs of Chicago, the Commission sued in federal district court and in the FTC’s administrative process. The Seventh Circuit and ultimately the district court agreed, validating the FTC’s analyses and methodologies. With the two hospital systems remaining separate, consumers will continue to reap the benefits of this competition, which include lower prices and higher quality service.”

The companies’ decision to terminate the transaction came after a March 7, 2017 ruling by the U.S. District Court for the Northern District of Illinois granting the FTC’s and State of Illinois’s request for a preliminary injunction.

In December 2015, the Commission challenged the proposed merger, alleging that the merged entity would have operated a majority of the hospitals in the area, and controlled more than 50 percent of the general acute care inpatient hospital services. The likely result would have been significant harm to consumers – with rising healthcare costs and diminished incentives to upgrade services and improve quality, according to the complaint.

The U.S. District Court for the Northern District of Illinois initially denied the request for a preliminary injunction, which would have prevented the parties from consummating the merger, while maintaining the status quo pending a proceeding in administrative court. Stating that the district court’s findings regarding the geographic market were “clearly erroneous,” the U.S. Court of Appeals for the Seventh Circuit remanded the case back to the district court for further action, after which the district court granted the preliminary injunction.

The administrative trial was scheduled to begin 21 days after the U.S. District Court for the Northern District of Illinois ruled on the Commission’s request for a preliminary injunction as remanded by the Seventh Circuit, but when the preliminary injunction was granted, the parties abandoned the transaction. Under FTC rules, a matter in the administrative trial process must be terminated before the FTC can formally close the investigation. The Commission’s vote to dismiss the complaint was 2-0.

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