On February 27, 2020, the Federal Trade Commission (FTC) issued an administrative complaint seeking to block the proposed merger of Jefferson Health (Jefferson) and Albert Einstein Healthcare Network (Einstein). The FTC argues that the merger will reduce competition for inpatient acute rehabilitation services in the greater Philadelphia area.

According to the complaint, the prolonged competition between the providers has compelled each of them to upgrade its medical facilities, improve patient access, and offer lower reimbursement rates to commercial insurers. The FTC argues that the proposed merger would suppress that healthy competition, which would raise healthcare costs and diminish the incentives for the post-merger provider to improve the quality of care that it offers to its patients.

Collectively, Jefferson and Einstein cover a broad swath of the inpatient general acute care (GAC) hospitals and inpatient rehabilitation facilities in Philadelphia and the surrounding Pennsylvania suburbs.[1] According to the FTC, the post-merger provider would control at least 60% of the GAC hospital services market in and around North Philadelphia, 45% of that market in and around Montgomery County, and 70% of the inpatient acute rehabilitation services market in the greater Philadelphia area. The complaint avers that, on account of the providers’ reputations, their combined size, and the breadth and depth of their services, it is unlikely that potential competitors will enter or expand to the greater Philadelphia area in sufficient volume to offset the anti-competitive effects that would result from the merger.

The FTC conducted its investigation in cooperation with the Office of the Attorney General of Pennsylvania (OAG). The FTC’s administrative trial is scheduled to begin on September 1, 2020. Meanwhile, the FTC and the OAG will file a separate complaint in the United States District Court for the Eastern District of Pennsylvania requesting a temporary restraining order and a preliminary injunction to halt the merger pending resolution of the administrative proceeding.

According to Axios, the administrative complaint marks the first instance of FTC opposition to a major hospital combination since 2016, when it urged state officials in Tennessee and Virginia to intervene in a proposed merger of Mountain States Health Alliance and Wellmont Health System. Despite its opposition, the FTC did not issue either an administrative complaint or a complaint seeking injunctive relief in that case, and the merger closed in 2018. Prior to its most recent intervention in the proposed Jefferson/Einstein merger, the FTC had not issued an administrative complaint challenging a hospital merger since 2015 when it initiated three such actions, two of which ultimately resulted in busted deals.

[1] GAC hospitals offer services that require an overnight stay. IRFs provide services to patients who are recovering after being treated at GAC hospitals.

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