Downers Grove, Ill.-based Advocate Health Care and Evanston, Ill.-based NorthShore University HealthSystem terminated their proposed merger agreement March 7 after a federal judge granted a preliminary injunction to temporarily halt the merger.
U.S. District Court Judge Jorge Alonso granted the Federal Trade Commission and state of Illinois' request for a preliminary injunction to temporarily block the merger. His opinion, filed under seal, has not been released.
Here are five reactions to the health systems' decision to discontinue their proposed merger.
1. Rex Burgdorfer, vice president of Juniper Advisory, an independent investment banking firm, said the health systems' decision to terminate the transaction raised a broader question regarding the future ownership structure of the industry. Mr. Burgdorfer said despite the recent uptick in mergers and acquisitions in the hospital industry between 2010 and 2016, roughly 1,891 companies are responsible for controlling the nation's 4,330 hospitals. He said consolidation is occurring across the industry, but it's "slow," and healthcare remains a "very fragmented industry." Mr. Burgdorfer added that the proposed merger "was a combination of two small companies, relative to norms in the corporate world and relative to large systems that exist elsewhere across the country."
2. Leslie Overton, partner at Alston & Bird, said that "given the 7th Circuit's analysis and conclusion that the district court clearly erred on geographic market, [Advocate and NorthShore] faced an uphill battle on remand. The FTC's expressed delight [over] the court's decision is consistent with [the] expectation that the agency is unlikely to dramatically shift hospital merger enforcement."
3. Lisl Dunlop, partner at Manatt, Phelps and Phillips, said she wasn't surprised by the district court's decision last week. She said the 7th U.S. Circuit Court of Appeals was "fairly strong in their findings," which made it unlikely Judge Alonso would endorse the health systems' position or remand. "I thought it was a real possibility that [NorthShore and Advocate Health Care] might cancel the deal after the 7th Circuit decision," said Ms. Dunlop.
4. Joe Lupica, chairman of Newpoint Healthcare Advisors, a healthcare advisory firm, said the decision proves that a hospital's "scale" or the perceived necessity of consolidation may not always provide the best outcome for patients. He said healthcare industry leaders "have heard so much about the lofty goal of achieving ever more scale, as if 'scale' is an absolute good. Though the achievement of scale can bring efficiencies to patients, the raw market power of scale can also bring them higher premiums." He said, "Perhaps the ruling will give the leaders of such nonprofit giants a reason…to re-examine their decisions in light of their fiduciary duty to the people they serve."
5. Tad Lipsky, acting director of the bureau of competition at the FTC, issued the following statement in response to the decision last week: "The FTC is delighted with [the] district court ruling, which enjoined this merger, and the parties' subsequent decision to abandon the transaction. Advocate and NorthShore's merger would likely have reduced the quality and increased the cost, of healthcare for residents of the North Shore area of Chicago."