UPMC’s ARHS acquisition deal far from completed

AG’s office

has shut down several mergers in recent years

By William Kibler

Area residents might assume that the pending UPMC acquisition of Altoona Regional Health System is a done deal.

But the oversight of the state Attorney General’s Office – which evaluates all hospital mergers in Pennsylvania for antitrust problems – has led to the collapse of several merger plans in recent years.

In November, the office, along with the Federal Trade Commission, announced it was planning to sue to block the merger of Reading Health System and Reading Surgical Institute.

The parties subsequently abandoned their plans, said AG office spokesman Dennis Fisher.

The AG-FTC complaint in that case charged that the proposed merger would increase the health system’s already significant negotiating leverage, enabling it to raise reimbursement rates for commercial insurers for services over which the organizations now compete, according to an FTC news release.

That would increase costs for local employers, leading them to cut benefits or charge more for those benefits, in turn causing some employees to forego medical care, according to the complaint, as outlined in the news release.

The deal would have raised market share for the combined organizations to levels ranging from 49 to 71 percent, depending on the service considered, according to the agencies.

The merger might also have eliminated nonprice competition, which could have reduced the incentive to maintain quality, the agencies charged.

Previously, proposed mergers between Hamot Medical Center and St. Vincent Health System in Erie; WellSpan Health and Hanover Hospital in York County; and Community Medical Center and Moses Taylor Hospital in Scranton were abandoned after the AG’s office notified the parties it planned to sue to block the deals, Fisher said.

The office sued prior to the merger between Altoona and Bon Secours hospitals and between Conemaugh Valley Memorial and Lee Regional hospitals in Johnstown, leading to consent orders setting restrictions, he said.

Fisher declined to speculate on the likelihood of regulatory action on the UPMC-Altoona Regional proposal.

At the federal level, companies generally must apply under the Hart-Scott-Rodino Antitrust Improvements Act for permission to merge when deals exceed $66 million, according to the FTC website.

The FTC and Department of Justice share antitrust jurisdiction, but the FTC almost always handles hospital mergers.

The agency approves most mergers within 30 days, according to the FTC website. If not, the agency may ask for more information.

After receiving that information, the agency has 30 more days to OK the merger, work out a compromise settlement or sue in federal district court or administratively to block the merger, according to the website.

FTC spokesman Peter Kaplan could not comment specifically on the UPMC-Altoona proposal – not even to say whether the FTC is reviewing it.

Generally, the AG’s office and the FTC work together on evaluating mergers. If not they do separate examinations.

Competition is not a panacea, especially in health care, according to an FTC/ DOJ report, “Improving health care: a dose of competition.”

Health care can be a difficult arena for competition, because patients often don’t know much about their illnesses or the services they need and because they’re insulated from the cost of those services through insurance – which is often chosen for them by employers who indirectly guide them in their choice of providers, according to the article.

Still, competition “generally results in lower prices and, thus, broader access” – as well as higher quality and more innovation, the article states.

Mirror Staff Writer William Kibler is at 949-7038.