FTC moves to block Advocate, NorthShore merger

Jim Skogsbergh, president and CEO of Advocate Health Care, wasn't shocked Friday that the Federal Trade Commission said it would block Advocate's merger with Northshore University HealthSystem.

After more than a year of following the federal approval process, and doing interviews before the FTC, Skogsbergh knew it wouldn't be easy.

"Given the interview process last week, I walked away feeling our message had fallen on deaf ears," he said.

That message was how the Oak Brook-based Advocate's merger with Northshore would be better for their patients by saving them money, providing more and better services, and allowing competition to continue in a large, very competitive marketplace. But the FTC didn't agree.

The FTC alleges that the proposed merger would operate more than 50 percent of the general acute care inpatient hospital services. The result could significantly harm consumers with rising health care costs and diminished incentives to upgrade services and improve quality, according to a FTC document.

The federal court complaint is expected to be filed soon in the U.S. District Court for the Northern District of Illinois, Eastern Division, the FTC said. An administrative trial is scheduled to begin on May 24, 2016. A judge would then decide on if the merger is allowed.

Skogsbergh said Advocate and Northshore were willing to work with the FTC to prove they wouldn't raise prices.

"We were willing to sign an agreement about prices and the FTC just rejected it outright," Skogsbergh said. "We didn't get past go."

This court process now could take up to six months, Skogsbergh said.

The FTC is seeking a temporary restraining order and a preliminary injunction in federal court to prevent the parties from consummating the merger, and to maintain the status quo pending the administrative proceeding.

Advocate and Northshore are close competitors with a history of upgrading medical facilities, investing in new technologies, and adjusting their approach to managed care contracting to compete against each other, according to the complaint. The proposed merger would eliminate the robust competition between them for inclusion in health insurance companies' hospital networks, the FTC said in documents.

"Advocate is one of the largest health systems in the Chicago area, and it competes directly with Northshore in the northern suburbs of Chicago," said Debbie Feinstein, director of the FTC's Bureau of Competition. "This merger is likely to significantly increase the combined system's bargaining power with health plans, which in turn will harm consumers by bringing about higher prices and lower quality."

The complaint also alleges that if the merger takes place, neither entry by new providers in the North Shore area nor expansion by current ones will offset the likely harm to consumers caused by the lost competition.

Northshore does not agree. "We remain steadfast in our commitment to come together for the betterment of the patients and communities we serve," Mark Neaman, Northshore president and CEO said in a statement. "We believe that by bringing together our two organizations, we will lower costs, enhance care and expand access while driving innovation."

Advocate and Northshore are part of a continuing stream of mergers in recent years as hospitals and health care systems prepare for a rapidly changing environment outlined in the federal Affordable Care Act. The Advocate-Northshore deal comes on the heels of Chicago-based Northwestern Memorial Healthcare merging with Winfield-based Cadence Health, Elgin-based Sherman Health Systems joining Advocate Healthcare, and Naperville-based Edward Health Services Corp. merging with Elmhurst Memorial Healthcare.

Skogsbergh still believes the merger would provide a brighter future for the two health care groups and their patients. He is firm that the merger wouldn't lead to higher prices or reduce competition in the Chicago and suburban market.

"This isn't Boise, Idaho. This isn't Toledo, Ohio. This is a major market with a lot of competition," Skogsbergh said.