HCA Healthcare on Thursday called off its proposed acquisition of five Steward Health Care System hospitals in Utah amid opposition from federal regulators.
The Federal Trade Commission filed a lawsuit June 2 to block the proposed transaction, which would have reduced the number of health systems offering acute services from three to two in some markets. The acquisition would have ended Steward’s role as a direct competitor and increased HCA’s bargaining power with insurers, resulting in higher prices that would’ve been passed onto consumers via increased premiums, deductibles and out-of-pocket expenses, the FTC said.
“This should be a lesson learned to hospital systems all over the country and their counsel: the FTC will not hesitate to take action in enforcing the antitrust laws to protect healthcare consumers who are faced with unlawful hospital consolidation,” Holly Vedova, director of the FTC’s bureau of competition, said in a news release late Thursday.
For-profit hospital chain HCA, of Nashville, Tennessee, did not respond to requests for comment. Dallas-based, for-profit Steward did not immediately provide a comment.
HCA operates eight hospitals in Utah, six of which are in the Salt Lake City area, making it the second-largest system in the region behind Intermountain Healthcare. Steward has five hospitals in the area.
The HCA-Steward deal was the second hospital transaction nixed this week. RWJBarnabas Health on Tuesday scrapped its proposal to acquire St. Peter’s Healthcare System in New Brunswick, New Jersey. The West Orange, New Jersey-based not-for-profit health system said it and St. Peter’s mutually agreed to end the transaction, which the FTC said would’ve given the combined entity about 50% of market share for general acute care services in Middlesex County.
This is the third hospital transaction that has been abandoned this year before going to court. Lifespan and Care New England Health System—the two largest providers in Rhode Island—dropped their merger plans in February after federal and state authorities pushed back.
“These (outcomes) have emboldened the FTC,” said Jane Willis, a partner at law firm Ropes & Gray who focuses on antitrust issues. “Parties who were contemplating affiliations have to take into account the risk of an FTC challenge more than they had in the past. There is a deterrent effect that they are trying to cause.”
In response, more health systems will consider clinical affiliations and other informal partnerships rather than pursue a full-scale acquisition, Willis said.
“We see some of that thinking currently, where parties are asking if they need to do a member-substitution (transaction) to achieve what they are trying to do together,” she said. “They should take the FTC seriously because these are very difficult times for a full-asset merger of hospitals and health systems.”
