Hospital groups blast FTC for opposing Louisiana merger: ‘Unjustifiable overreach’

Lina Khan, chairwoman of the Federal Trade Commission, wants federal regulators to review LCMC Health's acquisition of three hospitals. Hospital groups say Louisiana's approval of the deal should be sufficient. (Photo: FTC)

Several hospital advocacy organizations are blasting the Federal Trade Commission’s efforts to block a hospital merger in Louisiana.

The FTC is seeking court approval to block LCMC Health’s acquisition of three hospitals from HCA Healthcare. The FTC has said it wants to stop LCMC from integrating the hospitals into the system until federal regulators can review the transaction. Louisiana state officials have approved the deal.

The American Hospital Association, America’s Essential Hospitals, the Federation of America Hospitals and others have sent a joint letter to FTC Chairwoman Lina Khan describing regulators’ actions as “an unjustifiable overreach.”

The hospital groups are urging regulators to approve the deal.

“The Commission’s actions appear to be part of a growing pattern of what one former commissioner called an agency-wide policy of ‘gratuitously taxing’ mergers and acquisitions, which he explained ‘does nothing for competition,’” the letter states. “We urge the Commission to rethink this policy and abandon its efforts to impede this merger through a costly and burdensome regulatory process.”

The hospitals’ letter underscores the growing clashes between health systems and the FTC, as regulators express more concerns about the increased consolidation of hospitals.

LCMC Health has also sued the FTC and the U.S. Justice Department, arguing that federal officials shouldn’t be intervening since Louisiana officials have signed off on the deal.

• Read more: Expect more hospital mergers and partnerships out of financial need

‘This is extraordinary’

The FTC cited the Hart-Scott-Rodino Antitrust Improvements Act of 1976 in its efforts to stop LCMC from integrating the three hospitals into the system. The commission says federal regulators must review the transaction, and that LCMC Health acted improperly in closing the deal without notifying federal agencies.

"We are seeking to hold LCMC accountable for disregarding the law by ignoring filing requirements and prematurely consummating their deal,” Khan said in a statement in April. “Businesses that believe they can flout the law should be on notice: we will use the full scope of our authority to combat obstruction and to vindicate the FTC’s authority to investigate potentially illegal deals.”

Conversely, the hospitals argue that the FTC’s use of the Hart-Scott-Rodino Act in the Louisiana transaction is unprecedented. They contend Supreme Court precedent establishes that actions taken by states aren’t subject to federal antitrust laws.

“This is extraordinary,” the hospitals said in the letter. “Never before has the Commission attempted to enforce HSR against a state-controlled merger or acquisition. Nor has any court ever held that HSR applies to such transactions.”

The Association of American Medical Colleges, the Children’s Hospital Association and the Louisiana Hospital Association also signed the hospital groups’ letter.

The FTC has been applying more scrutiny to hospital mergers, particularly those involving organizations in the same region. The FTC has also been sending a message that state certification shouldn’t be a substitute for antitrust laws.

Last August, the FTC released a white paper on what it described as the failings in state-issued “Certificates of Public Advantage.” The FTC says the certificates don’t protect the public interest and lead to higher costs for patients.

The FTC objected to the New York State Health Department’s application for a Certificate of Public Advantage for SUNY Upstate Medical University’s planned acquisition of Crouse Health System in Syracuse, N.Y. The FTC said the proposed merger would raise healthcare costs and reduce access to care. In the face of regulatory opposition, SUNY Upstate and Crouse Health abandoned the planned merger in February.

• Read more: These planned hospital mergers collapsed. Here’s why.

‘Compelling reasons’ for merger

The hospitals argue that under Louisiana state law, the state’s attorney general possesses the authority to sign off on hospital mergers and acquisitions. The hospital groups also argue that the deal will expand healthcare options for patients.

“The Louisiana attorney general had compelling reasons to approve this merger,” the letter states. “It was designed to increase access to clinical services and high-quality health care in the New Orleans region and to create expanded hubs for specialty care, innovation and academic medicine.”

In a statement sent to Chief Healthcare Executive® in April, LCMC Health said the state certification process was “rigorous and transparent.”

“We are on solid ground and Louisiana knows what is best for our community,” LCMC Health said in the statement. “We are steadfast in our commitment to delivering health, care, and education beyond extraordinary for all, and continuing to deliver the benefits of the partnership for our patients and community.”

Louisiana Attorney General Jeff Landry has also condemned federal regulators for trying to block the LCMC deal and said he would fight federal officials on the matter.

In October, LCMC Health announced it had reached a deal with HCA Healthcare to buy three hospitals in a $150 million transaction. Under the agreement, LCMC acquired Tulane Medical Center, Lakeview Regional Medical Center, and Tulane Lakeside Hospital.

With the deal, LCMC Health, a non-profit system, would operate nine hospitals in the New Orleans region. Ochsner Health is the other main provider in the region.

Last fall, LCMC Health and Tulane University also announced plans to expand healthcare options and medical training for doctors and nurses in the region. LCMC Health said it would invest $220 million into upgrades for East Jefferson General Hospital, Lakeview Regional Medical Center, and Tulane Lakeside Hospital.

The hospital organizations also note that Tulane University is committing an additional $600 million on redevelopment efforts in New Orleans, including nursing, research and graduate scholarship programs.