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FTC Shows ProMedica its Teeth

 |  By Philip Betbeze  
   December 09, 2011

I have twin three-year-old daughters who are addicted to a couple of TV Christmas specials. They absolutely would watch Frosty the Snowman or Rudolph The Red-Nosed Reindeer as many times as we would let them. So as the holidays approach, I've become something of an expert on the plot of each.

So as I was thinking about my column this week on the Federal Trade Commission's recent challenges to hospital and health system consolidation, I was reminded of one of the central plots in Rudolph. Bear with me. One of Rudolph's villains, as you'll no doubt recall, is the Bumble, an abominable snowman that menaces our hero.

In the climactic scene, Bumble is knocked unconscious, and the elf, Hermey, a misfit who wants to be a dentist instead of a toymaker, removes the Bumble's teeth. The Bumble then wakes up only to find that without his teeth, he is harmless and powerless.

It seems the FTC has worked that process in reverse. Someone has put its teeth back in.

The FTC recently achieved major victories in its quest to maintain a level, non-monopolistic playing field in the hospital sector. It could successfully be argued that the agency has overreached.

Of course, as we've seen, some of what's required for hospitals and health systems to participate in accountable care organizations conflicts with FTC guidelines, making decisions about mergers quite murky and filled with potential landmines for any senior hospital executive.

Those same executives complain that they're being encouraged on one hand to develop closer relationships with their local competitors in order to better coordinate care and limit waste in healthcare through ACOs, but the other hand of government is preventing them from taking these very actions.

It's a legitimate complaint, despite guidance from the Justice Department and the FTC that seems to promise relaxed enforcement regarding partnerships and acquisitions that are necessary for ACO development.

But one has only to look at the FTC's victory this week over ProMedica in Ohio to get a sense that the agency's enforcement efforts are getting tougher rather than easier, despite the rhetoric.

The agency not only ruled that St. Luke's Hospital's partnership enacted last year with ProMedica violated antitrust rules, but also won an important victory in the court of an administrative law judge. Though ProMedica, which has already executed the partnership, will appeal, this is undoubtedly a huge legal expense that must be borne by both the government and ProMedica.

One could argue this fight is necessary to establish guidelines, and a possible safe harbor for future tie-ups, but taken alone, it's not exactly an efficient use of time or money in bringing down healthcare costs. And the FTC's hospital challenges continue to mount.

The FTC is notorious in healthcare for causing trouble among hospital organizations that want to merge. Occasionally over the years, and depending on the political affiliation of the administration in charge, the agency would get serious about its role as an arbiter of fair trade.

As such, the FTC would choose to challenge hospital and health system acquisitions that it felt would cause a monopoly over healthcare services in a given geographical area. Never mind the expense that would be associated with dissolving a partnership. Of course, no one wants a hospital to dominate a single market and exercise monopoly power, but the agency certainly isn't as vigilant on the payer side of the equation.

Frankly, an FTC challenge, for hospitals at many times in the past, was simply an annoyance. It might delay the transaction, but seldom did the agency ever ultimately prevail in preventing any but the most obviously anticompetitive mergers from happening. It's much more than an annoyance now. The FTC's actions may seem arbitrary, but this Bumble now has teeth, and it may be best to try to avoid him until things get a little more clear, or until an elf with a proclivity for dentistry comes along.

Philip Betbeze is the senior leadership editor at HealthLeaders.

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