- Lifespan and Care New England, Rhode Island's two largest health systems, are scrapping plans to merge after the Federal Trade Commission sued to block the deal, along with the state's attorney general. Both health system boards decided "not to pursue litigation," according to a joint statement released Wednesday.
- The boards also decided not to turn to legislative action like obtaining a Certificate of Public Advantage, known as a COPA, which is a mechanism to shield mergers from federal antitrust enforcement in exchange for conditions imposed by state regulators.
- The two said they will continue to find ways to partner that are "appropriate from a legal perspective, and allow them to best serve the needs of the community." The FTC did not immediately respond to a request for comment.
The move comes as antitrust regulators aim to modernize merger guidelines and crack down on tie-ups that would lead to more concentration than competition in certain markets. After taking office, President Joe Biden called out the healthcare industry specifically for being rife with consolidation and said his administration would take an aggressive stance on hospital mergers.
The FTC alleged the tie-up between Lifespan and Care New England would increase prices and diminish the quality of care, and said the two systems combined would control at least 70% of Rhode Island's market for inpatient hospital services and also reduce competition in several nearby Massachusetts communities.
Lifespan and Care New England toyed with the idea of merging for years, though inked the deal last February after the pandemic revived discussions. The two systems touted the merger as a way to create an integrated academic health system with Brown University's medical school in a central role, and Brown University committed $125 million to the creation of the new system.
System executives seemed surprised when the FTC sued to block the tie-up, and said the agency reviewed the same proposed merger and allowed it to proceed on four separate occasions in prior years, according to a joint statement from the systems.
The systems also said they offered up to 30 conditions to regulators to satisfy antitrust concerns about the merger, but neither the FTC nor attorney general discussed the conditions with the systems prior to suing to block the deal.
Regulators often point to hospital mergers leading to less competition and higher prices, though in a joint letter on the deal from FTC Chair Lina Khan and Commissioner Rebecca Kelly Slaughter, the two highlighted the impact mergers have on labor markets.
"Just as we want firms to compete with each other to sell goods and services to their customers, we want employers to compete with each other to attract and retain workers," the letter states. "Indeed, there is a growing body of empirical research about the potential for competitive harm to labor markets from consolidation and concentration."
Mergers that significantly reduce the number of hospitals in a local labor market can reduce wage growth for workers like nurses, a March 2021 report in the American Economic Review found.
That study compared markets in which hospital mergers occurred between 2000 and 2010 versus those that did not, comparing the effects of wages four years after such tie-ups occurred.
Nurses and pharmacy workers' wages were 6.8% lower four years later than they would have been absent the merger, that study found.
Another recent deal in the healthcare sector that the FTC is eyeing is UnitedHealth Group's $8 billion blockbuster acquisition of Change Healthcare, a healthcare technology firm, over concerns it would result in a massive tie-up of hospital health IT service providers.
That deal has been mired in regulatory limbo since the Department of Justice first opened its investigation into the tie-up in March last year, two months after it was first announced.
More recently, UnitedHealth and Change said they would give the DOJ 10 days notice before completing the merger, during which the DOJ could launch a lawsuit to stop it — a process the department has reportedly already begun.
On Feb. 17, UnitedHealth and Change gave the DOJ that 10-day notice, giving the agency a Sunday deadline to block the deal.
In August, the FTC said it was overwhelmed by a surge of merger filings and warned applicants it may not vet all submissions before the applicable deadlines. And in letters sent to merging companies, the FTC warned the delay should not be interpreted as a green light for any deal.