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The 34-year-old behind 6 health system M&As that never were

The Federal Trade Commission and the Justice Department have ramped up antitrust enforcement against mergers and acquisitions across various industries, including healthcare, since Lina Khan, 34, was appointed FTC chair, a position she will hold until Sept. 25, 2024. 

Before joining the FTC, Ms. Khan was an associate professor of law at Columbia Law School in New York City. She previously served as counsel to the U.S. House Judiciary Committee's subcommittee on antitrust, commercial and administrative law, legal adviser to former FTC Commissioner Rohit Chopra and legal director at the Open Markets Institute. 

Earlier this year, the FTC requested a budget of $590 million for 2024 — an increase of $160 million from 2022. The agency said $70 million of the additional funding will go toward addressing healthcare merger challenges, rulemaking and investigations. 

The Biden administration supported this move in a series of policies announced Dec. 7 and signaled its intention to apply more scrutiny to anticompetitive practices and implement stricter reviews of healthcare mergers and acquisitions. 

On Dec. 18, the FTC and Justice Department updated their merger guidelines, which break down the factors and frameworks used to review proposed deals. Under the guidelines — which apply to both horizontal and vertical mergers — health systems would not be allowed to merge if doing so prevents a potential competitor from entering the market or reduces incentives to pay higher wages. The guidelines may also be used to challenge cross-market mergers that have been historically difficult to challenge. 

In their Dec. 18 Hart-Scott-Rodino Report to Congress, the FTC and DOJ outlined that they filed 50 merger enforcement actions in fiscal year 2022 — the highest level of enforcement activity in more than 20 years — and this trend is expected to continue in 2024 amid changing M&A guidelines and stricter reviews of potentially anticompetitive deals. 

Ms. Khan and the FTC will be armed with more tools and resources to challenge such transactions in 2024, but they have already had some success in the last two years. Here are six health system M&As that were called off after FTC enforcement actions or challenges under Ms. Kahn's leadership:

1. John Muir Health and Tenet Healthcare

Walnut Creek, Calif.-based John Muir Health terminated plans to fully acquire San Ramon (Calif.) Regional Medical Center from majority owner Tenet Healthcare. 

The FTC on Dec. 17 sued to block the deal, arguing that it would drive up healthcare costs in the area by eliminating head-to-head competition between John Muir and Tenet. 

"John Muir's anticompetitive hospital takeover would have driven up healthcare costs for critical services like heart surgery, spinal surgery and maternity care. It also threatened to eliminate improvements in care driven by competition, which directly benefit patients," FTC Bureau of Competition Director Henry Liu said in a statement. "Now that this transaction is terminated, John Muir and Tenet's San Ramon Regional Medical Center can continue competing head-to-head to offer high-quality care at the best prices for Californians in the I-680 corridor."

John Muir and Tenet said they strongly disagreed with the FTC but decided not to fight the agency in court "due to the cost and disruption of litigation," according to a statement shared with Becker's.

2. Steward Health Care and HCA 

In June 2022, Nashville, Tenn.-based HCA and Dallas-based Steward Health Care System abandoned their proposed deal involving five Utah hospitals. The decision came 13 days after the commission challenged the transaction.

HCA had planned to acquire five Utah hospitals from Steward. Under the proposed acquisition, the hospitals would become part of HCA's mountain division, which includes 11 hospitals throughout Utah, Idaho and Alaska. 

The FTC alleged the acquisition would eliminate the second-and fourth-largest healthcare systems in Utah's Wasatch Front region, where about 80% of the state's residents live. By filing suit to challenge the deal, the transaction was halted pending an administrative proceeding with an administrative trial set to begin Dec. 13.

"For the second time in a week, parties who proposed an anticompetitive hospital merger have called their deal off after the FTC filed a complaint to block the deal," FTC Bureau of Competition Director Holly Vedova said in an statement. "This transaction, like the RWJBarnabas Health/Saint Peter's transaction that was abandoned two days ago, should never have been proposed in the first place. This should be a lesson learned to hospital systems all over the country and their counsel: The FTC will not hesitate to take action in enforcing the antitrust laws to protect healthcare consumers who are faced with unlawful hospital consolidation."

3. RWJBarnabas Health and Saint Peter's Healthcare System 

In June 2022, two New Jersey systems — New Brunswick-based Saint Peter's Healthcare System and West Orange-based RWJBarnabas Health — terminated a definitive agreement to merge after the FTC filed a suit to block the transaction. 

The FTC alleged the deal would eliminate head-to-head competition between the two systems and raise prices for inpatient general acute care services. The deal would have given the combined health system a market share of about 50% for general acute care services in Middlesex County as a whole, resulting in a presumption of harm under the antitrust laws, according to the agency's complaint. 

"Saint Peter's University Hospital is less than one mile away from [RWJBarnabas] in New Brunswick, and they are the only two hospitals in that city," Ms. Vedova said. "There is overwhelming evidence that this acquisition would be bad for patients, because the parties would no longer have to compete to provide the lowest prices and the best quality and service."

4. Hackensack Meridian Health and Englewood Health

Edison, N.J.-based Hackensack Meridian Health and Englewood Health withdrew their plans to merge in April 2022 after a U.S. appellate court affirmed the order of the district court to block the deal. 

The FTC challenged the transaction in 2020, arguing it would give Hackensack Meridian control of three of the six hospitals in Bergen County and raise healthcare costs, according to nj.com. U.S. Circuit Judge D. Michael Fisher agreed the acquisition would raise prices, despite the systems arguing that merging some operations would bring savings.

"We firmly believe this merger was in the best interest of our patients and the community at large," Hackensack Meridian told Becker's. "Given the appellate court's decision, the board and leadership of Hackensack Meridian Health have decided not to pursue the merger."

5. Care New England and Lifespan

In February 2022, the boards of Lifespan and Care New England — both based in Providence, R.I. — called off plans to merge after the FTC filed a suit with Rhode Island Attorney General Peter Neronha to block the deal. The merger would have given the combined system 80% of the market's hospital beds and ownership of eight of Rhode Island's 13 hospitals. 

The FTC cited competition concerns in its decision. Rhode Island Attorney General Peter Neronha said the state would join the FTC in the lawsuit, stating the deal would raise healthcare costs.

"If this extraordinary and unprecedented level of control and consolidation were allowed to go forward, nearly all Rhode Islanders would see their healthcare costs go up for healthcare that is lower in quality and harder to access, and Rhode Island's healthcare workers would be harmed," Mr. Neronha said in his decision.

6. Crouse Health System and State University of New York Upstate Medical University

Syracuse, N.Y.-based SUNY Upstate Medical University and Crouse Health System abandoned plans to merge in February 2022.

The decision came after the FTC voiced its opposition to the deal, claiming it would leave Syracuse with just two hospital systems — Upstate and St. Joseph's Health — and give the combined entity a 67% share of commercially insured inpatient services in Onondaga County.

"It is very good news for patients and healthcare workers in upstate New York that this proposed merger is not going to happen," Elizabeth Wilkins, director of the FTC's office of policy planning, said. "The deal presented substantial risk of serious competitive and consumer harm in the form of higher healthcare costs, lower quality, reduced innovation, reduced access to care and depressed wages for hospital employees."

In its comment to the New York State Department of Health, the FTC opposed the neighboring hospitals' request to grant a certificate of public advantage — which gives the state authority to greenlight hospital mergers — arguing that it could have shielded the planned merger from antitrust laws.

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