Eleven states filed an amicus brief with a federal appeals court requesting that the merger between Advocate Health Care and NorthShore University HealthSystem be suspended until the Federal Trade Commission (FTC) can hold administrative hearings on the proposed deal.

In June, a U.S. District judge denied the FTC’s motion for a preliminary injunction to block the merger. The FTC is challenging the deal on the grounds that it would “substantially lessen competition and cause significant harm” to consumers through increased costs. 

The combined entity would be the 11th largest nonprofit hospital network in the country and would garner approximately 60 percent of hospital services in the North Chicago area, according to the FTC. The two health systems counter that their market share is roughly 30 percent and that the merger would save consumers as much as $1.1 billion annually via a new health insurance plan. 

The states supporting the FTC’s appeal of the lower court’s decision are Connecticut, Idaho, Iowa, Maine, Massachusetts, Minnesota, Mississippi, Montana, Oregon, Pennsylvania and Washington. In the brief they argue that the district court judge failed to consider whether an insurer would pay more for services if the merger were to be completed, and instead focused more on patients’ willingness to travel farther for services. Their concern is that the merger would set a precedent that could diminish competition throughout the U.S. and drive up costs. 

Last week, 33 economists filed a separate but similar amicus brief. Arguments in the case are set to be heard on Aug. 15.

Our Take: The pendulum is swinging back toward caution with respect to large-scale mergers in the health care space. Last week we saw the Justice Department and the FTC forcefully reject the Anthem-Cigna and Aetna-Humana acquisitions in the name of competition and consumer protection; in this case, the U.S. District judge failed to block the merger and the FTC is pushing back. With so many states showing support for the FTC’s position, a deal that was initially thought to be a layup is showing signs of trouble. We will be watching this merger closely and will report on further developments in the coming weeks.

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