Coalition of attorneys general move to block New Jersey hospital merger

Photo: VioletaStoimenova/Getty Images

This week, a multistate coalition of attorneys general, led by California Attorney General Rob Bonta and Pennsylvania Attorney General Josh Shapiro, urged the U.S. Court of Appeals for the Third Circuit to ensure the availability of affordable and accessible healthcare by protecting competition in local healthcare markets.

Specifically, the coalition is looking to block the merger of Hackensack Meridian Health and Englewood Health, both based in New Jersey. The attorneys general filed an amicus brief in Federal Trade Commission v. Hackensack Memorial Hospital and Englewood Healthcare Foundation, asking the court to affirm a district court decision to halt the merger under federal antitrust law.

On August 4, the U.S. District Court for the District of New Jersey granted a preliminary injunction blocking the merger, citing potential anticompetitive effects, such as reduced care quality and higher prices, without any extraordinary efficiencies to offset those harms. The injunction was set to last at least until the completion of an internal trial by the Federal Trade Commission. The two hospitals filed an appeal shortly after this decision.

The coalition argued that states have seen a wave of hospital consolidation, resulting in large healthcare systems with substantial market power -- and the ability to wield it -- to the detriment of insurers and patients. 

According to the brief, hospitals facing less competition have the ability to charge higher prices without providing improvements to the efficiency or quality of care. The coalition also said anticompetitive mergers can impose other harms, including reduced employment, a smaller tax base and a reduction in services.

Bonta and Shapiro are joined by the attorneys general of Colorado, Connecticut, Delaware, Guam, Idaho, Illinois, Indiana, Maryland, Massachusetts, Minnesota, Nebraska, New Hampshire, New Mexico, New York, Nevada, North Carolina, North Dakota, Oregon, Rhode Island, Virginia, Washington, Wisconsin and the District of Columbia.

WHAT'S THE IMPACT?

Hackensack and Englewood announced their plans to merge back in the fall of 2019. The deal would give Hackensack control of three of the six acute care hospitals in Bergen County, N.J. For its part in the deal, Englewood would receive a $400 million investment from Hackensack.

It wasn't until December 2020 that the FTC filed an administrative complaint and a legal case against the proposed merger.

On August 4, New Jersey Judge John Michael Vazquez sided with the FTC when he granted the regulator an injunction to halt the merger. Following the ruling, the health systems expressed their disappointment, especially after already getting the green light from the New Jersey Department of Health and the New Jersey Office of the Attorney General.

Although Hackensack is getting regulatory pushback for its current acquisition, it was able to complete its purchase of JFK Health, an Edison-based system, in 2018.

THE LARGER TREND

Hospital mergers and acquisitions have been on the rise, with 13 announced deals in Q1 2021, compared to 29 in 2020. The trend is expected to continue throughout the year, according to Moody's Investors Service.

The rise in consolidations has left many rural communities without good options for convenient and affordable healthcare service, according to a recent executive order from President Biden that encourages the Department of Justice and FTC to review and revise their merger guidelines.

Hospital advocacy groups, including the Federation of American Hospitals and the American Hospital Association, pushed back on the executive order, saying integration and scale can be beneficial in responding to community needs, particularly during a pandemic.

However, following the recent "tidal wave of merger filings," the FTC announced in August that it was adjusting its review process and that companies who complete their deals before formal approval from the FTC risk having them unwound down the road.

"Companies that choose to proceed with transactions that have not been fully investigated are doing so at their own risk," the FTC said in its announcement. "Of course, this action should not be construed as a determination that the deal is unlawful, just as the fact that we have not issued such a letter with respect to an HSR filing should not be construed as a determination that a deal is lawful."

This follows an investigation the FTC began earlier this year to look into how past mergers impacted competition, with hopes of using its findings to revamp its merger retrospective program.

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com