Antitrust Law Daily Relevant market, ‘weakened competitor’ status among central issues in Philly-area hospital merger challenge
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Thursday, October 15, 2020

Relevant market, ‘weakened competitor’ status among central issues in Philly-area hospital merger challenge

By Jeffrey May, J.D.

Proposed findings of fact and conclusions of law in an FTC/state challenge to the proposed merger of Jefferson Health and Albert Einstein Healthcare Network highlight the issues for the court on the enforcers’ motion for preliminary injunction.

Contending that the FTC and State of Pennsylvania have not properly defined the relevant market and have not shown a future competitive threat in their challenge to the proposed merger of Jefferson Health and Albert Einstein Healthcare Network, the merging parties have urged the federal district court in Philadelphia to deny a preliminary injunction request from the antitrust enforcers. Both sides in the case filed proposed findings of fact and conclusions of law this week following a preliminary injunction hearing that lasted six days. The FTC and Pennsylvania argued that they made their case and that a presumption of anticompetitive harm warranted blocking the deal pending a full FTC administrative proceeding (In the Matter of Thomas Jefferson University and Albert Einstein Healthcare Network, FTC Dkt. 9392, File No. 181 0128; FTC v. Thomas Jefferson University, Case No. 2:20-cv-01113-GJP).

In September 2018, Einstein Healthcare and Jefferson (Philadelphia University + Thomas Jefferson University) announced that they had entered into a binding definitive agreement to integrate into a single healthcare system. Talks of a combination reportedly began in 2017.

The FTC in February of this year moved to block the proposed deal pending an administrative trial. Jefferson and Einstein are two leading providers of inpatient general acute care hospital services and inpatient acute rehabilitation services in the Philadelphia area, according to the agency. The FTC alleged that the proposed merger would reduce competition in both Philadelphia and nearby Montgomery County. Jefferson operates 11 general acute care (GAC) hospitals and two inpatient rehabilitation facilities or IRFs. Einstein operates three GAC hospitals and provides inpatient acute rehabilitation services at its nationally renowned MossRehab IRF and at four other IRF units.

The preliminary injunction hearing was held in September. On October 1, the court asked the parties to provide the court with their proposed findings of fact and conclusions of law.

Government’s arguments. The government contends in its filing that the proposed merger would substantially lessen competition in three relevant markets: (1) inpatient GAC services sold to commercial insurers and their members in the Northern Philadelphia Area, (2) inpatient GAC services sold to commercial insurers and their members in the Montgomery Area, and (3) inpatient acute rehabilitation services sold to commercial insurers and their members in the Philadelphia Area. The FTC argues that Jefferson and Einstein account for a combined 64.5% of inpatient GAC discharges within the Northern Philadelphia Area, and they account for a combined 49.9% of inpatient GAC discharges of commercially insured patients in the Montgomery Area. They also argued that the merging parties failed to rebut the government's prima facie case with their "weakened competitor" defense.

Merging parties’ position. The merging parties, on the other hand, argue in their filing that the plaintiffs failed to meet their burden to properly define any relevant geographic market for GAC services, nor any product or geographic market for inpatient rehab services. Moreover, they assert that an "examination" of Philadelphia’s market realities demonstrates that anticompetitive effects are unlikely and that procompetitive efficiencies that will generate substantial cost savings and sustain Einstein’s flagship hospital further weighed against the plaintiffs’ claim of anticompetitive effects. According to the defendants, Einstein’s financial condition prohibits the investments necessary to attract more commercial patients, and it struggles to maintain services and quality, while its peers are investing aggressively. Further, the balance of the equities weighed against the injunction because it would derail the merger, resulting in the further erosion of Einstein’s financial position and leading Einstein to cut services to "vulnerable patient populations."

Attorneys: Charles E. Dickinson for the FTC. Abigail U. Wood, Pennsylvania Office of Attorney General, for Commonwealth of Pennsylvania. Paul H. Saint-Antoine (Faegre Drinker Biddle & Reath LLP) for Thomas Jefferson University. Virginia A. Gibson and Alexander B. Bowerman (Hogan Lovells US LLP) for Albert Einstein Healthcare Network. Howard Bruce Klein (Law Offices Of Howard Bruce Klein, PC) for Albert Einstein Healthcare Network and Thomas Jefferson University.

Companies: Thomas Jefferson University; Albert Einstein Healthcare Network

MainStory: TopStory AcquisitionsMergers Antitrust FederalTradeCommissionNews PennsylvaniaNews GCNNews

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