FTC's challenge of Jefferson-Einstein merger heads to court Sept. 14: What health system leaders should know

Alia Paavola - Print  | 

The Federal Trade Commission's legal challenge to block the proposed merger of Einstein Healthcare Network and Jefferson Health heads to court Sept. 14. 

Here is a breakdown of a what to know about the legal challenge:

FTC's challenge

The FTC announced in February its intent to sue to block the merger of the two Philadelphia-based health systems, arguing that combining the two systems would reduce competition in Philadelphia and Montgomery County. 

In particular, the FTC said that with a combination, the two parties would own at least 60 percent of the inpatient general acute care service market around Philadelphia and at least 45 percent of that same market in Montgomery County. The FTC also claims the deal would cut competition for inpatient rehabilitation services in the Philadelphia area.

Items of note about the lawsuit

The lawsuit will be the first litigated hospital merger since the FTC commissioners in January promised to step up oversight and scrutiny of potential hospital mergers, according to Law360.

It is also the first time the FTC has challenged a hospital merger based on alleged harm to inpatient rehabilitation services, Law360 reported. Typically, instead of challenging hospital mergers based on particular service lines, the FTC focuses on general acute care. 

Defendant's arguments

Einstein and Jefferson plan to defend against the FTC's claims with several arguments. The first is that substantial efficiencies outweigh any potential harm from the merger. 

The organizations claim that the transaction will result in $58 million annually in efficiencies, according to Law360. This is more than double the $23 million in annual harm to general acute care and $2.8 million in annual harm to inpatient rehabilitation services that the FTC claims the merger would result in. 

A second defense is that the merger of Einstein and Jefferson Health is a matter of survival for Einstein's flagship hospital. The health systems argue that Einstein, which has only had annual operating profits twice since 2012, is on a path to financial failure without the deal and needs $500 million to invest in key capital projects and deferred maintenance. 

Without the infusion, Jefferson and Einstein said Einstein will continue to weaken "as it is forced to cut services or close facilities."

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