On February 27th, the Federal Trade Commission (FTC) and the Attorney General of the Commonwealth of Pennsylvania (AG) filed a lawsuit in federal court to challenge a proposed merger between two Philadelphia-area healthcare systems: Thomas Jefferson University (Jefferson) and Albert Einstein Healthcare Network (Einstein). The lawsuit seeks to preliminarily enjoin the merger until the FTC can adjudicate the merger’s legality in an administrative proceeding. Jefferson and Einstein have both agreed not to close the merger until seven days after the court rules on the FTC and AG’s motion for the preliminary injunction.
On September 14, 2018, Jefferson and Einstein signed an integration agreement whereby Jefferson would assume control of Einstein. Jefferson is the largest health care system (by hospital beds) in the greater Philadelphia region, having completed four other mergers with smaller systems since 2015. The transaction would combine Jefferson’s eleven general acute-care hospitals with Einstein’s three. The parties also have inpatient rehabilitation facilities that provide post-acute rehabilitative care for patients with conditions such as strokes and traumatic brain injuries.
The FTC and AG allege that the transaction would give the combined entity at least a 60% share for general acute-care hospital services in the “Northern Philadelphia Area,” at least a 45% share for general acute-care hospital services in the neighboring “Montgomery Area,” and at least a 70% share for inpatient acute rehabilitation services in the “Philadelphia Area” (measured by commercially insured patient admissions).
On February 27th, the FTC and AG filed suit in the Eastern District of Pennsylvania to enjoin the merger. The same day, the FTC filed an administrative complaint against the merger. Simply put, the FTC and AG are asking the court to preliminarily enjoin the merger, so that the competitive merits of the merger can be decided through the FTC’s administrative process. In considering this request, the court will consider whether the FTC is likely to succeed in its administrative challenge. If the FTC and AG are successful in obtaining a preliminary injunction, then the merits of the challenge would ultimately be decided through the FTC’s administrative process, assuming the parties still want to pursue the transaction at that point.
Because this case is the first challenge to a hospital merger that the FTC has brought since 2015, it is a significant development in its own right. But the FTC and AG’s complaint is noteworthy for three additional reasons.
In summary, this lawsuit is the first challenge to a hospital merger that the FTC has brought since 2015. It stands as a reminder that the FTC continues to examine hospital mergers closely, even in urban areas that have a number of sophisticated competitors.