5 healthcare antitrust cases to watch in 2015

From Toledo, Ohio-based ProMedica's merger deal appeal to the U.S. Supreme Court to what lies next for Boston-based Partners HealthCare now that its settlement deal has been rejected, there are five major antitrust cases healthcare executives should keep their eyes on in 2015.

1. ProMedica's appeal to the U.S. Supreme Court. In January, ProMedica Health System appealed the ruling that blocked its acquisition of Maumee, Ohio-based St. Luke's Hospital to the U.S. Supreme Court.  

ProMedica and St. Luke's merged in August 2010. After the merger, ProMedica became Lucas County, Ohio's dominant hospital provider controlling more than 50 percent of the market for primary and secondary services and more than 80 percent of the market for obstetrical services.

Five months after the merger, the Federal Trade Commission challenged it. Subsequently, an administrative law judge and later the FTC concluded the merger would adversely affect competition in LucasCounty. As a result, the FTC ordered ProMedica to divest St. Luke's, as it concluded divesture would be the best means to preserve competition.

 ProMedica's appeal to the Supreme Court comes after the 6th U.S. Circuit Court of Appeals in Cincinnati upheld the FTC's order.

Concerning the appeal to the Supreme Court, ProMedica released a statement saying, "Throughout this legal process we have been steadfast in our belief that the joinder between ProMedica and St. Luke's has been the right thing to do for our community. We have been and remain committed to St. Luke's Hospital and are hoping for the opportunity to present our case to the U.S. Supreme Court." 

If the Supreme Court takes the case, "it will be the first time in decades the Supreme Court has weighed in on the antitrust aspects of a merger," says Steve Cernak, of counsel at Schiff Hardin and a member of the firm's antitrust and trade regulation team. He says the case could have a significant effect on the healthcare industry as a whole because it could change what we "know" about merger reviews. "The court could give some broad pronouncements on its views on the merger guidelines used by the agencies," says Mr. Cernak.

R. Dale Grimes, attorney at Bass, Berry & Sims and leader of the firm's antitrust and trade practices group, sees the broad implications if the 6th Circuit's ruling is upheld by the Supreme Court.

"If the ruling is allowed to stand or is affirmed by the court, hospitals in small and medium-sized markets, or even in larger markets that have already experienced a sufficient amount of concentration, will have to carefully evaluate the pros and cons of entering into acquisitions that might be seen to increase market share into a perceived 'danger zone,'" he says.

If the high court declines to take up the case, Mr. Cernak says "ProMedica will still be an important example of how the agencies view hospital mergers and what arguments courts find most persuasive."

2. St. Luke's acquisition of Saltzer Medical Group. St. Luke's Health System in Boise, Idaho, has been in the news in the past few years for its role in a highly publicized antitrust case concerning its acquisition of Saltzer Medical Group in Nampa, Idaho.

In January 2014, a federal judge sided with the FTC in ruling St. Luke's violated antitrust laws when it acquired Saltzer. The judge ordered St. Luke's to unwind its 2012 acquisition of the medical group. In June 2014, St. Luke's appealed the decision. In July 2014, the court allowed St. Luke's to continue operating Saltzer while it challenged the ruling that it violated antitrust laws.

"One of the most significant aspects of this case was the court's findings that the transaction was designed to improve healthcare outcomes and to improve quality of care, and that those goals would probably be achieved, but that under traditional antitrust market analysis, the acquisition threatened to give the combined parties market power and therefore should be enjoined," says Mr. Grimes.

Since many hospitals are seeking to purchase physician groups to deliver more integrated care — transactions that could prompt close antitrust review — the outcome of this case could have broad implications on the healthcare industry as a whole.

"How the courts weigh the potential efficiencies that could be accomplished through these transactions — and whether the hospitals have the burden of showing they could not reasonably be achieved without an acquisition — could substantially impact the ability of hospitals to defend such transactions," says Robert Leibenluft, an attorney at Hogan Lovells whose practice is devoted to health and antitrust matters.

3. Partners HealthCare's acquisitions in Massachusetts. While the former Massachusetts Attorney General proposed a settlement with Partners HealthCare concerning its acquisitions of South Shore Hospital in Weymouth, Mass., and Hallmark Health System in Melrose, Mass., the deal was highly criticized and ultimately rejected by the district court.

Before the settlement was rejected, new Massachusetts Attorney General Maura Healy took a strong stance on the deal, firmly opposing the transactions in a three-page court filing and threatening to file an antitrust suit against Partners.

With the settlement deal being rejected by the court it will be interesting to see whether litigation follows. If the deal does go to litigation, important questions will be answered that could be applicable to other similar transactions. 

4. Health First's monopoly case. Rockledge, Fla.-based Health First is facing an antitrust lawsuit accusing it of maintaining a monopoly by "intimidating physicians or otherwise obstructing their ability to practice medicine in south Brevard County if they do not play ball with Health First and refer patients exclusively to Health First hospitals and physician specialists," according to a Florida Today report.

According to the complaint, which was filed by several plaintiffs, including Melbourne, Fla.-based multispecialty group Omni Healthcare, Health First's monopoly began with its 2013 purchase of Melbourne (Fla.) Internal Medicine Associates, a multispecialty physician group. The lawsuit refers to the MIMA deal as a "merger to monopoly," according to Florida Today.

The complaint states Health First controls more than 70 percent of the acute inpatient hospital market in south Brevard County and "physicians participating in its health plans send only 15 percent of their patients to competitor Wuesthoff Medical Center-Melbourne," according to the report.

Health First's consolidation in Florida raises many questions. "For instance, if the consolidated entity owns all the hospitals in the relevant geographic area, must it provide admitting privileges to physicians outside the group?" says Mr. Cernak.

This case is currently pending in federal court in Florida.

5. AbbVie's pay-for-delay case. The Supreme Court ruled in 2013 that pay-for-delay deals are not inherently illegal, but that did not stop the FTC from suing North Chicago, Ill.-based AbbVie for allegedly keeping a generic testosterone-boosting drug under wraps for years and forcing "consumers to overpay hundreds of millions for the drug AndroGel," according to a statement by FTC Chairwoman Edith Ramirez.

The clear implication of AbbVie's alleged actions is that as long as generics are delayed, the costs of the drugs involved remain high. 

The outcome of this case is significant because it is the first FTC action on this issue since the Supreme Court's 2013 decision regarding pay-for-delay cases. Therefore, "it gives a good indication of how the FTC will interpret the Supreme Court's opinion and will give an early indication of how the courts will respond to that interpretation," says Mr. Cernak.

 

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