A federal judge has blocked the Federal Trade Commission's efforts to halt Thomas Jefferson University's acquisition of the Albert Einstein Healthcare Network, a health system primarily serving the Philadelphia area in eastern Pennsylvania.
This week Judge Gerald Pappert of the U.S. District Court for the Eastern District of Pennsylvania wrote that the FTC has failed to demonstrate that there's a credible threat of harm to competition, which had been the FTC's rationale in attempting to block the merger.
According to the Philadelphia Inquirer, the FTC and the Pennsylvania attorney general are likely to appeal, which would delay potential completion of the merger for months. Merger plans were first announced in 2018 in a deal estimated to be worth $599 million. Jefferson would gain Einstein's three general acute care hospitals and an inpatient rehabilitation hospital if plans continue.
In the FTC's motion, the agency claimed Jefferson could complete the acquisition by next Wednesday if a stay is not granted.
WHAT'S THE IMPACT?
According to the court, the FTC needed to show sufficient evidence that insurers would not avoid a price increase in any of the government's proposed markets by turning their eyes to hospitals outside those markets.
Pappert concluded the FTC did not meet that threshold, pointing to regional competitors such as Penn Medicine, Temple Health and Trinity Health Mid-Atlantic. He also pointed to a consolidated commercial health insurance market including just four major insurers, including Blue Cross, Cigna, Aetna and United Healthcare.
THE LARGER TREND
So far this year, healthcare merger and acquisition activity has been down, primarily as a result of COVID-19. The second quarter of 2020 saw M&A activity drop 20% from the first quarter and 34% when compared to Q2 of 2019, according to Irving Levin Associates.
Not only were there fewer mergers and acquisitions in Q2, but the ones that did occur were worth less than those in Q1 2020 and Q2 2019, according to S&P Global Market Intelligence. The aggregate transaction value of the M&As in Q2 was $12.26 billion, compared to $29.31 billion in Q1, and $137.29 billion in the second quarter of 2019.
Despite Q2 being the lowest quarter as far as M&A activity in five years, analysts at Waller and Kaufman Hall predict that the pent-up M&A activity from the pandemic will "very likely" cause a surge of M&As moving into 2021. They predict that M&As will be particularly active among small and independent hospitals looking to partner to stay afloat.
Intermountain recently acquired Saltzer Health, a physician group in Idaho, in October. Last year, the system also acquired HealthCare Partners Nevada.