Health IT

Jefferson-Einstein merger moves forward as FTC steps aside

The Federal Trade Commission will not appeal a federal judge’s dismissal of its lawsuit that sought to block the Jefferson Health and Albert Einstein Healthcare Network merger, regulators told the Pennsylvania health systems Friday.

The FTC and Pennsylvania Attorney General Josh Shapiro claimed that the transaction would stifle competition and likely lead to price increases after the combined entity controls 60% of the North Philadelphia acute-care market. But regulators didn’t make a compelling case that insurers wouldn’t be able to find viable substitutes for the merged system and thus would have to submit to higher reimbursement rate mandates, U.S. District Court Judge Gerald Pappert wrote.

The FTC stepped aside after Shapiro dropped his office’s opposition on Jan. 12. The suit marked the final regulatory hurdle for the transaction, which would add three acute-care hospitals and a rehabilitation hospital to Jefferson’s network to form an approximately $6 billion system.

“It is gratifying to see the Federal Trade Commission and Pennsylvania Attorney General abandon efforts to block Thomas Jefferson University’s merger with the Albert Einstein Healthcare Network,” Faegre Drinker partner Kenneth Vorrasi said in a statement. He led the legal team representing Jefferson.

“Two non-profit, anchor institutions coming together to preserve access to care and do the right thing by the residents of Philadelphia is a creative solution to ensure Einstein doesn’t face the same fate as Hahnemann University Hospital, which closed more than a year ago,” said Dr. Stephen Klasko, president of Thomas Jefferson University and CEO of Jefferson Health. “It’s a milestone victory for the city of Philadelphia and for those patients and families we proudly serve.”

“We are very excited to have Einstein and Jefferson come together, as our shared vision will enable us to improve the lives of patients, the health of our communities and enhance our health education and research capabilities,” said Ken Levitan, interim president and CEO of Einstein Healthcare Network. “By bringing our resources together, we can offer those we care for—particularly the historically underserved populations in Philadelphia and Montgomery County—even greater access to high-quality care.”

The competitive advantage skews toward the insurer in Philadelphia, Pappert concluded, noting 51 area hospitals but only four insurers. Independence Blue Cross has more than half of the market share, accounting for around 20% of Jefferson’s total revenue, according to the court filings.

Finances for many smaller providers have deteriorated during COVID-19. As they have sought stability in larger merger partners, regulators are left to grapple with how likely they are to close or wind down services without merging versus the potential anticompetitive impacts of consolidation.

The FTC has warned that it will not allow “opportunistic” mergers that stem from the pandemic, even as COVID-19 has reinforced the need for reserve capacity and capital in the event of future national or global emergencies.

Faegre Drinker is also representing Hackensack Meridian Health, in a similar suit by the FTC to block Hackensack’s proposed acquisition of Englewood Health in northern New Jersey.

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