Deal activity in the trillion-dollar U.S. patient-care industry has been hardy, despite projections that the pandemic might have slowed things down. That means the federal government is also busy scrutinizing hospital M&A. The Department of Justice dropped its challenge of a Pennsylvania hospital system deal this month when the buyer agreed to cap its ownership of the seller. Also this month, two Georgia healthcare systems gave up their planned merger in the face of a Federal Trade Commission challenge, while the Commission gave the green light to another deal in Pennsylvania.
DOJ Resolves Antitrust Case Against Pennsylvania Health Care Providers
The Department of Justice has reached a settlement with Geisinger Health and Evangelical Community Hospital that will resolve the government’s challenge to Geisinger’s partial acquisition of Evangelical. The settlement requires Geisinger to cap its ownership interest in Evangelical at a 7.5% passive interest and eliminates additional entanglements between the two competing hospitals. The DOJ alleged that Geisinger and Evangelical are close competitors for inpatient general acute-care hospital services for patients in a six-county area in central Pennsylvania, where the two hospital systems together account for approximately 70% of the market.
Following FTC Staff Recommendation to Challenge Transaction, Two Georgia Health Care Systems Abandon Merger
Following the announcement from Atrium Health Navicent, Inc. and Houston Healthcare System, Inc. that they are abandoning their proposed merger, the Federal Trade Commission closed its investigation into the proposed transaction. FTC staff had determined that the proposed merger would eliminate the intense competition between two of the largest hospital systems in the Macon-Warner Robins area of central Georgia. The investigation revealed that the merger was likely to cause significant harm to central Georgia patients and businesses in the form of higher healthcare costs. Staff also uncovered evidence that competition to improve quality of patient care, invest in facilities and technologies, and expand access to healthcare services would be harmed by the merger.
FTC Drops Challenge to Merger of Two Pennsylvania Hospital Networks
The Federal Trade Commission will no longer challenge the merger between Einstein Healthcare Network and Jefferson Health, effectively giving the green light for the merger of the two historically linked academic medical centers. The merger is expected to close within the next six months. This will expand Jefferson from 14 to 18 hospitals and bring together two of the nation’s top inpatient rehabilitation hospitals – the MossRehab/Moss Rehabilitation Research Institute and Jefferson Health-Magee Rehabilitation.
A “Transformational Year”
As reported by RevCycleIntelligence, as of the end of October 2020, it was a “transformational year” for the healthcare industry. “While the COVID-19 pandemic forced the healthcare industry to find new ways to deliver high-quality care to patients during a crisis, this was also the year some provider organizations engaged in major healthcare merger and acquisition deals,” wrote Jacqueline LaPointe.
“Healthcare merger and acquisition activity has been on the rise for the past couple of years as providers face a number of new challenges and opportunities, such as value-based care, high expenses, and a growing demand for alternative care sites. And as of late,” LaPointe wrote, “the activity has centered on ‘mega mergers,’ or deals between organizations that both have at least $1 billion in annual revenues.”
She broke down 10 of those deals.
U.S. Hospital Industry
According to research conducted by Becker’s Hospital Review (and reported by Statista) there are approximately 6,210 hospitals in the United States, a decline since 1980 when there were nearly 7,000. There are some 5.3 million persons employed full-time in U.S. hospitals, a workforce that is increasing year over year. According to the Bureau of Economic Analysis, U.S. hospitals generate a total gross output of around $895 billion. PolicyAdvice.net says more than $1 trillion is spent on patient care in the U.S.
The largest portion of U.S. hospitals are non-profit facilities, Statista reports. A smaller share includes private-owned for-profit hospitals. In most cases, these hospitals are part of hospital chains. For-profit hospitals developed especially in the 1990s, with the aim to gain profit for their shareholders. The Hospital Corporation of America, based in Nashville, Tennessee, is the U.S. for-profit hospital operator with the highest number of hospitals.
Edited by Tom Hagy for MoginRubin LLP.