FTC and Pennsylvania challenge proposed merger of two Philly hospital systems

The Federal Trade Commission has authorized an action to block the proposed merger of Jefferson Health and Albert Einstein Healthcare Network, both providers of inpatient general acute care hospital services and inpatient acute rehabilitation services. The systems operate in both Philadelphia County and Montgomery County, Pennsylvania.

The FTC issued an administrative complaint alleging that the proposed merger would reduce competition in both counties.

According to the complaint, Jefferson and Einstein have a history of competing against each other to improve quality and service, for example by upgrading medical facilities and investing in new technologies. The proposed merger, the complaint contends, would eliminate the robust competition between Jefferson and Einstein for inclusion in health insurance companies' hospital networks to the detriment of patients.

The Commission has authorized staff to seek a temporary restraining order and a preliminary injunction to prevent the parties from consummating the merger, and to maintain the status quo pending the administrative proceeding. The FTC, jointly with the Pennsylvania Attorney General, will file a complaint in federal district court.

WHAT'S THE IMPACT

Jefferson and Einstein offer a broad range of medical and surgical diagnostic and treatment services that require an overnight hospital stay, known as inpatient general acute care, or GAC, services.

Einstein's GAC hospitals compete significantly with Jefferson's GAC hospitals in and around North Philadelphia and Montgomery County. The complaint alleges that, as a result of the merger, the parties would control at least 60% of the inpatient GAC hospital services market in and around North Philadelphia, and at least 45% of that market in and around Montgomery County.

Inpatient rehabilitation facilities, or IRFs, provide intensive multi-disciplinary rehabilitation services to patients previously treated at GAC hospitals who are recovering from serious, acute conditions such as a stroke, traumatic brain injury or spinal-cord injury.

Collectively, Jefferson and Einstein operate six of the eight IRFs in the Philadelphia area in and around Einstein's flagship Moss at Elkins Park facility. According to the complaint, as a result of the merger, the parties would control at least 70% of the inpatient acute rehabilitation-services market in the Philadelphia area.

The Commission vote to issue the administrative complaint and to authorize staff to seek a temporary restraining order and preliminary injunction was 4-0-1. The administrative trial is scheduled to begin on September 1, 2020. The federal court complaint and request for preliminary relief will be filed in the U.S. District Court for the Eastern District of Pennsylvania.

THE LARGER TREND

The two organizations announced their intent to merge in September 2018, with Dr. Stephen K. Klasko, president of Thomas Jefferson University and CEO of Jefferson Health, saying at the time that the move was "a critical step forward for the students and patients of both institutions and equally as important for our community as a whole."

"This merger will enhance the services provided to our patients and their families in the communities we serve, and Einstein will continue living its mission of providing high-quality care with humanity, humility and honor," read a statement on the Jefferson Health website.

ON THE RECORD

"Patients in the Philadelphia region have benefited enormously from the competition between the Jefferson and Einstein systems," said Ian Conner, director of the FTC's Bureau of Competition. "This merger would eliminate the competitive pressure that has driven quality improvements and lowered rates. Throughout our investigation, we have benefited from close cooperation with our partners in the Office of the Attorney General of Pennsylvania."

Twitter: @JELagasse

Email the writer: jeff.lagasse@himssmedia.com