The Advocate Aurora Health and Atrium Health merger is likely to get a close review from the Federal Trade Commission as the Biden administration has taken a tougher stance on healthcare consolidation, antitrust and legal experts say.
"I don't think anything of this size in a healthcare transaction today is going to get rubber stamped," said Bill Horton, a partner at Jones Walker who focuses on healthcare transactions.
Antitrust regulators have challenged hospital deals when close competitors seek to merge within the same market.
"Historically, the FTC concern in hospital and healthcare institution mergers has been the geographic overlap," Horton said.
Advocate Aurora and Atrium do not have any geographic market overlap. The systems span six separate states through the Midwest and South.
"It doesn't raise the same red flags, but it doesn't mean that it gets waved through," said Leemore Dafny, a Harvard Business School professor and former deputy director of healthcare and antitrust at the FTC.
The FTC is likely to examine whether the two systems negotiate with the same insurers even if they're in different geographic locations, Dafny said.
Employers with multiple locations and employees in these states "might have a reason to be concerned about any potential change in bargaining leverage of these two systems when it comes to negotiating with, say, UnitedHealthcare," Dafny said.
Dafny has published research in the RAND Journal of Economics on this topic, examining the effects of cross-market mergers, noting there has been "very little regulatory activity" in this area despite the pace of these mergers.
Dafny found hospitals acquiring another in-state facility does raise prices by 7% to 10%. The research found out-of-state acquisitions did not result in a meaningful change in price. The results focus on the effects of mergers when there are common insurers, however.
"The research doesn't let them off the hook," Dafny told Healthcare Dive.
The FTC's scrutinization does not necessarily mean the agency will move to block it.
Beaumont Health and Spectrum Health in Michigan recently finalized a cross-market merger after the FTC requested additional information to review the deal, according to prior Healthcare Dive reporting.
The deal brought together Spectrum Health’s 14 hospitals lining the western side of the state, while Beaumont’s eight hospitals hug the Detroit area on the opposite side of the state.
Wednesday's merger announcement comes as the Biden administration has called out consolidation in the healthcare industry, and instructed regulators to take a tougher stance in an executive order issued last summer.