- A new brief from out Wednesday from research firm KFF explores the potential of consumer cost changes and antitrust regulation when healthcare systems engage in cross-market mergers, including a body of research indicating possible healthcare price increases.
- Antitrust agencies have historically focused on mergers between hospitals and health systems that operate in the same geographic market, the KFF brief noted. The Federal Trade Commission has never formally challenged a cross-market merger and antitrust agencies have not developed guidelines for evaluating them.
- Regulating cross-market mergers, will be “on the radar” of policymakers and regulators as they become increasingly common, KFF said. Between 2010 and 2019, cross-market mergers made up 55% of hospital M&A ventures, and drove at least nine large-scale mergers since June 2021.
Cross-market mergers between large health systems are expected to become more common post-pandemic, according to an April report from Kaufman Hall. The mergers are appealing in part because they have faced less oversight from regulators compared with same-market deals.
Last year, Advocate Aurora Health in the Midwest and Atrium Health in the South closed their $27 billion merger without challenge from the FTC, creating the nation’s fifth-largest nonprofit health system by revenue. This year, UnityPoint Health and Presbyterian Healthcare Services signed a letter of intention to join their 40 hospitals, health plans and clinics across Illinois, Iowa, New Mexico and Wisconsin.
In certain cases, cross-market mergers can benefit patients if health systems operate synergistically as a combined unit, sharing knowledge and developing best practices for managing patient care, according to the KFF brief.
However, the limited data on cross-market mergers suggests the ventures can constrict competition and have at times driven up prices by between 6% to 17%, according to the report.
Recently, state and federal regulators have sought to increase oversight into cross-market mergers, despite pushback from hospital lobbyists.
In July, federal regulators announced proposed updates to merger guidelines for the first time in nearly a decade. The guidance would allow the FTC to put the brakes on mergers that could put parties on the path to becoming a monopoly, which antitrust lawyer Jim Burns told Healthcare Dive earlier this summer would be “the beginning of some sort of basis for making arguments on non-traditional transactions.”
States have also taken a swing at cross-market mergers. In California, the state attorney general imposed conditions on cross-market mergers, placing restrictions on price increases and requiring that merged entities maintain a minimum number of emergency room, intensive care and obstetrics beds.
In Minnesota, regulators created significant friction when Minnesota-based Fairview Health Services and South Dakota-based Sanford Health announced plans to merge. The attorney general launched an investigation into the merger, and legislators passed a law that would have required the AG to sign off on any for-profit or out-of-state ownership of University of Minnesota healthcare facilities — which would have directly affected the venture. In July, the health systems announced they were abandoning the merger.