Amid FTC opposition, SUNY Upstate Medical University drops plan to acquire Crouse Health

After substantial opposition from regulators, SUNY Upstate Medical University has dropped its plans to acquire Crouse Health System in Syracuse, N.Y.

The Federal Trade Commission was investigating the effects of the planned merger. The agency warned consumers would see higher prices and a reduction in healthcare services. The FTC has applied more scrutiny to hospital mergers and acquisitions, especially those involving organizations in the same regions.

Elizabeth Wilkins, director of the FTC’s office of policy planning, welcomed the news that the deal isn’t going forward.

“It is very good news for patients and healthcare workers in upstate New York that this proposed merger is not going to happen,” Wilkins said in a statement Thursday.

“As we said in our comment to the New York State Department of Health, the deal presented substantial risk of serious competitive and consumer harm in the form of higher healthcare costs, lower quality, reduced innovation, reduced access to care, and depressed wages for hospital employees,” she said.

SUNY Upstate and Crouse Health issued joint statements late last week that they would not be moving forward with the transaction and would remain separate entities, Syracuse.com reported.

In a statement, Mantosh Dewan, SUNY Upstate’s president said, “This is not the outcome we anticipated when we started down this road, but it is the prudent decision at this time and is a result of the economic and operational headwinds health care is facing, not just here in Syracuse, but nationwide.”

• Read more: These proposed hospital mergers and acquisitions collapsed. Here’s why.

SUNY Upstate Medical University and Crouse Health System initially announced the merger plans in April 2022. The systems filed an application with the New York Department of Health for a Certificate of Public Advantage in July.

Generally, the FTC has opposed such state certificates, saying they don’t protect the public interest and shield organizations from antitrust laws. The FTC objected to the pursuit of a state certificate in SUNY Upstate’s plans to acquire Crouse Health.

Beyond the process, the FTC argued that the deal would be bad for patients. The FTC said SUNY Upstate and Crouse Health are competing for patients in the same region, spurring them to provider better services and prices as they vie for consumers.

The FTC said if the merger went forward, residents in the region would go from three hospital options to two. The merged organization would have nearly 67 percent of commercially insured inpatient hospital services in Onondaga County, the agency said.

In an 88-page letter to the New York health department, the FTC wrote that “the proposed merger presents substantial risk of serious competitive and consumer harm in the form of higher healthcare costs, lower quality, reduced innovation, reduced access to care, and depressed wages for hospital employees.”

When SUNY Upstate and Crouse announced the merger plans, officials with the systems said a combined system would have more than 13,000 employees, 1,200 licensed inpatient hospital beds and offer more than 70 specialties.

The systems said the merger was a natural progression of their work together in recent years, including collaborating to deal with the COVID-19 pandemic. The organizations also said a merged system would provide more clinical training opportunities for prospective doctors and nurses.

SUNY Upstate, the only academic medical center in central New York, says it serves patients from the Pennsylvania state line to the border of Canada. SUNY Upstate operates the 715-bed Upstate University Hospital, which includes Upstate Golisano Children’s Hospital.

Crouse, a nonprofit hospital, is licensed for 506 acute care beds and serves a 15-county area in central and northern New York.

While the FTC is taking a closer look at hospital mergers and acquisitions, analysts say they expect to see more health systems pursuing deals in the coming year or two. Some may be pursuing deals for strategic advantages or to gain assistance in areas such as telehealth or outpatient procedures, while some systems may need to find partners to stay afloat financially, industry analysts say.

Even though regulators are applying more scrutiny, the FTC is still signing off on some significant deals.

The FTC signed off on the merger of Atrium Health and Advocate Aurora Health, creating one of the nation’s largest nonprofit hospital systems, now known as Advocate Health. Analysts noted the two systems operate in separate regions, avoiding one major concern of regulators, and potentially serving as a model for other hospital deals.