« Environment - A number of recent stories | Main | Ind. Decisions - Indiana attorney general's office denied a "do-over" »

Saturday, October 22, 2005

Law - Hospital merger in Chicago suburbs voided by judge; termed landmark decision

"Judge voids 2000 merger of North Shore hospitals" is the headline to this long story today in the Chicago Tribune. Some quotes:

A federal judge has ruled that the merger of two hospital operators in the affluent northern suburbs of Chicago led to unfair price hikes and violated antitrust laws in a landmark decision released Friday that could lead to similar challenges of mergers across the country.

The ruling ordered the undoing of a 2000 merger of Evanston Northwestern Healthcare and Highland Park Hospital. The judge, who oversees a court at the Federal Trade Commission in Washington, D.C., directed the company to sell Highland Park Hospital, separating it from others it owns in Evanston and Glenview.

Evanston Northwestern plans to appeal, first to the FTC and later, if necessary, to a federal appeals court, likely the 7th Circuit in Chicago. That process could take two years.

When the FTC filed a complaint in 2004 challenging the merger four years after it had been consummated, the case was unique. But such challenges could become more common as soaring hospital costs have grown to encompass more than half of all health-care spending. * * *

The case is considered a landmark of sorts for federal antitrust lawyers who used the challenge to renew the federal government's aggressive stance toward hospital mergers. Throughout the 1990s, the FTC and the Justice Department lost a combined seven cases challenging hospital mergers.

The decision against Evanston Northwestern will certainly be precedent-setting if the FTC forges ahead, as many think it will, to challenge other hospital mergers in its renewed push to rein in health-care costs, analysts say.

FTC attorneys would not comment on their future strategy toward mergers or this ruling.

The case has been watched nationally by health insurers, employers and hospitals, as well as locally by tens of thousands of patients in the north suburbs who use the three hospitals: Evanston Hospital, Glenbrook Hospital in Glenview and Highland Park Hospital.

Even if Evanston Northwestern wins an appeal in coming years, antitrust analysts believe the government's victory will still have a chilling effect on hospital contracting and pricing behavior in the near term.

"If you are a hospital that is merging in the future, you are going to look very carefully at your pricing conduct post-merger and what Evanston did," Balto said. "I think that could be true for all industries. But knowing that the commission is already looking at hospital mergers, it's more true for hospitals."

This press release from the Federal Trade Commission provides more detail on the "initial decision and order issued by Chief Administrative Law Judge Stephen J. McGuire on October 17, 2005." Here is the case docket, including links to all the documents.

Note: The question of whether communities have right to restrict new medical centers - in this case whether, as the Star reported it, "hospital companies such as St. Francis should be allowed to build ERs to serve patients in Mooresville -- or anywhere else, for that matter -- without government restrictions was the focus of a trial ... in U.S. District Judge David F. Hamilton's courtroom in Indianapolis." For more, see this 10/6/05 ILB entry and this 10/10/05 update.

Posted by Marcia Oddi on October 22, 2005 12:45 PM
Posted to General Law Related