Supreme Court

ProMedica and the AHA Seek Guidance from SCOTUS on Hospital Consolidations and Mergers

Posted by Ryan Blaney on February 05, 2015
ACA, Federal Trade Commission, FTC, Supreme Court / No Comments

FTCStatueThe New Year started out with a bang in the healthcare antitrust circles with ProMedica Health Systems Inc.’s (“ProMedica”) well-publicized petition to the US Supreme Court and the American Hospital Association’s (AHA) amicus brief in support of ProMedica.  ProMedica hopes that the Supreme Court will hear the case and overturn a Sixth Circuit ruling requiring ProMedica to divest St. Luke’s Hospital, a non-profit hospital in Toledo, Ohio.  As evidence of the complexity and the lengthy litigation challenges between ProMedica and the Federal Trade Commission (“FTC”) this merger occurred almost five years ago in 2010.  The FTC and the Ohio Attorney General had sued to dissolve the deal because they considered it anti-competitive; arguing that ProMedica would control 60% of the hospitals in the greater Toledo area. The FTC ordered ProMedica to divest St. Luke’s (21 HLR 467, 3/29/12).  The Sixth Circuit agreed with the FTC on the grounds that the merger would likely result in higher prices for payors and consumers and lead to unintended precedent for future hospital mergers.

ProMedica’s petition argues that this case is “a rare and uniquely apt vehicle for consideration of the [merger law] issues based on a fully-developed record.”  Hospital merger cases rarely are litigated through appeal and this case is an opportunity for the Supreme Court to clarify fundamental aspects of merger law nearly 40 years after the United States v. General Dynamics Corp., 415 U.S. 486 (1974) decision.  ProMedica argues that over the last 40 years confusion has developed over the FTC’s unilateral-effects theory and consolidation pressures have increased with the passage of the Affordable Care Act and other federal regulations.

ProMedica’s petition focuses on three merger law questions that the lower courts are divided on as the primary reasons why the Supreme Court should hear the case:

  1. How the FTC defines relevant market product for a merger analysis and whether the FTC can base it on supply-side considerations. ProMedica argued that the FTC should have either analyzed hospital services market by market because one kind of surgery is not a substitute for another or the FTC should have considered all four levels of hospital services as a package-deal market.
  2. Where the FTC relies exclusively on a unilateral-effects theory in challenging a merger may a court adopt a strong presumption of anti-competitive harm based solely on market-share statistics?
  3. Can the FTC rely on market-share statistics to preclude consideration of the merger target’s financial weakness to rebut a presumption of harm based on market-share statistics in unilateral-effects cases?

The unilateral effects analysis is the degree to which the merging hospitals are substitutes for each other.  The higher the substitutability between two merging hospitals, the greater the competition among them and the greater the power.  Here, ProMedica argues that Mercy Hospital, not St. Luke’s, is the closest substitute in the Toledo area.

ProMedica received support from the American Hospital Association (“AHA”) on the third issue, the “weakened competitor” doctrine.  On January 21, 2015, AHA filed an amicus brief asking the US Supreme Court to review the Sixth Circuit decision and the lower court’s characterization that the “weakened competitor” argument is a “Hail Mary” that deserves credence only in rare situations.  AHA argues that the Sixth Circuit’s erosion of the “weakened competitor” doctrine leaves the “viability of many small and stand-alone hospitals in jeopardy.”  AHA also argues that there are conflicting interpretations by the lower courts on how to read the General Dynamics decision.  Clarity is needed from the Supreme Court especially in the context of health care mergers.  Hospitals should not have to wait until they are on the edge of bankruptcy to merge.  AHA believes that the Sixth Circuit errored when it did not apply the General Dynamics weakened competitor analysis to the ProMedica acquisition.

The case is ProMedica Health System Inc. v. Federal Trade Commission, case number 14-762, in the Supreme Court of the United States.  The FTC has until March 2, 2015 to file a response.  It is unknown when the Supreme Court will decide about hearing the case.

For further information contact Ryan P. Blaney, Washington, DC, at [email protected]

Ryan Blaney

Ryan Blaney

Ryan Blaney joined Cozen O'Connor as a member of the firm's Health Law group. Ryan practices in the firm's Washington, D.C., office. He focuses his practice on representing clients in the health care and life sciences industries in a wide range of matters, including health care fraud and abuse, civil and criminal government investigations, qui tam and whistle-blower disputes under the False Claims Act and other federal and state laws and regulations, HIPAA privacy and data security, compliance and transactional services, and antitrust matters.

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Decision Alert: US Supreme Court Potentially Shifts the Balance in Healthcare Employee Benefits Litigation

Posted by Ryan Blaney on January 26, 2015
Supreme Court / No Comments

US Supreme Court SealJustice Clarence Thomas and a unanimous US Supreme Court decided to vacate a Sixth Circuit decision and hold that the federal courts cannot assume from silence in a union’s collective bargain agreement that retiree group health insurance benefits continue indefinitely.  The Supreme Court found that collective bargain agreements should be treated the same as other contracts when the principles are consistent with federal labor policy.

The Court rejected the UAW-Yard Man decision and accompanying long standing principle called the Yard-Man Rule which provided that in the absence of clear contractual language a collective bargain agreement vested retirees with lifetime benefits. The Supreme Court’s M&G Polymers v. Tackett USA decision is attached here.

Check back for more in-depth analysis and coverage on this decision and its impact on employee benefits litigation or feel free to contact Cozen O’Connor’s Health Law and Employee Benefits Teams.

Ryan Blaney

Ryan Blaney

Ryan Blaney joined Cozen O'Connor as a member of the firm's Health Law group. Ryan practices in the firm's Washington, D.C., office. He focuses his practice on representing clients in the health care and life sciences industries in a wide range of matters, including health care fraud and abuse, civil and criminal government investigations, qui tam and whistle-blower disputes under the False Claims Act and other federal and state laws and regulations, HIPAA privacy and data security, compliance and transactional services, and antitrust matters.

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Supreme Court Upholds ACA’s Individual Mandate, But Limits Scope of Medicaid Expansion

Posted by Mark Gallant on July 05, 2012
Affordable Care Act, Supreme Court, Uncategorized / No Comments

In a heavily anticipated landmark ruling, the Supreme Court has upheld the constitutionality of the so-called “individual mandate” of the Affordable Care Act – i.e., the requirement that those not insured privately, through their employer or through a governmental program, must either purchase minimum essential health insurance coverage or pay a “penalty” for failing to do so.  The majority opinion was authored by Chief Justice Roberts and joined in part by Justices Breyer, Ginsburg, Kagan and Sotomayor. Continue reading…

Mark Gallant

Mark Gallant

Mark Gallant, is a member of the firm and chair of the health care group. He concentrates on client counseling and litigation involving federal and state regulation of health care providers and third-party payers.

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