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The Federal Trade Commission is suing to block the deal, arguing it would hurt competition and lead to higher prices.
Federal regulators are suing to block a planned merger between two New Jersey healthcare systems.
The Federal Trade Commission has authorized a suit to block RWJBarnabas Health’s planned acquisition of Saint Peter’s Healthcare System. Last month, the systems announced they had received the approval of New Jersey state officials.
However, the FTC announced its objection to the deal. It’s another indication that the Biden administration is applying more scrutiny of proposed healthcare consolidations within the same markets. FTC Bureau of Competition Director Holly Vedova outlined those concerns in a statement announcing the commission’s opposition to the deal.
"Saint Peter's University Hospital is less than one mile away from RWJ in New Brunswick, and they are the only two hospitals in that city," Vedova said in the statement. “There is overwhelming evidence that this acquisition would be bad for patients, because the parties would no longer have to compete to provide the lowest prices and the best quality and service.”
RWJBarnabas Health is one of New Jersey’s largest healthcare providers. The FTC argues the proposed merger would hurt competition and prices for acute care services in Middelsex County, in central New Jersey. New Brunswick is less than 30 miles from Manhattan.
“RWJ would be able to demand higher rates from insurers for the combined entity’s services, which, in turn, will likely lead to higher insurance premiums, co-pays, deductibles, or other out-of-pocket costs and/or reduced benefits for plan members,” the FTC said in the complaint.
The combined health system, if the deal would be approved, would have 50% of the general acute care services market in Middlesex County. The FTC argues the proposed deal would be harmful for patients and insurers.
The commission notes that the county’s other general acute care hospitals are outside New Brunswick. The FTC said a merged system would be able to push for higher reimbursement rates or more burdensome contracts, and patients would ultimately lose out.
The FTC voted 5-0 to seek a complaint and pursue legal action to block the deal. An administrative trial is scheduled to begin Nov. 29, 2022.
RWJBarnabas and Saint Peter’s have both said they want to create what they describe as New Jersey’s first premier academic medical center. The systems said the move would help establish Rutgers University as one of the nation’s most prestigious medical research and teaching schools and will help it attract world-class talent. Rugters’ flagship campus is in New Brunswick.
Barry H. Ostrowsky, president and CEO of RWJBarnabas Health, and Leslie D. Hirsch, president and CEO of Saint Peter’s Healthcare System, both said in a statement they were “incredibly disappointed” by the FTC’s action, NJ.com reported.
“We shall be reviewing the FTC’s complaint, which the State of New Jersey did not join, over the coming days and determine how to best move forward,” the system leaders said, according to NJ.com.
The systems previously said they secured the support of Horizon Blue Cross Blue Shield and Aetna Better Health, the New Jersey Business & Industry Association, and several top New Jersey lawmakers and trade organizations.
RWJBarnabas Health operates 11 hospitals, 4 children’s hospitals and dozens of other care sites. Saint Peter’s, a Catholic system, operates a 478-bed acute-care hospital and a children’s hospital. Under the proposed deal, Saint Peters would continue operating as a Catholic healthcare provider.
Earlier this year, the FTC opposed the plan merger of Care New England and Lifespan, with the commission citing concerns about competition. Care New England, which has struggled financially, continues to seek partners for a merger.
President Joe Biden’s administration has directed regulators to look closely at proposed healthcare mergers. He issued an executive order directing federal agencies to look closely at hospital consolidations, among others, to promote competition and guard against higher costs and lower wages.
Atrium Health and Advocate Aurora Health have announced their intentions to merge into a $27-billion healthcare system. In the proposed deal, neither system operates in the other’s market. Atrium Health, based in Charlotte, serves North Carolina, South Carolina, Georgia and Alabama, while Advocate Aurora operates in Illinois and Wisconsin.
Analysts expect the Atrium and Advocate Aurora merger, if approved, could spur other similar deals.
The first quarter of 2022 proved to be quiet for hospital mergers, largely due to the spike in COVID-19 cases and hospitalizations. However, analysts expect more deals to take place as the year progresses, as some smaller hospitals may find it more difficult to stay afloat without partners.