Just as a trial begins here Thursday that may determine whether a Chicago-area hospital merger led to reduced competition and significantly higher prices, a new analysis shows that such health-care deals are on the rise again.
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Last year, the number of hospitals acquired or merged into larger health-care systems rose 136 percent, to 130 from 55 in 2003. It’s the largest number of hospitals involved in merger activity since 2000, when 129 hospitals were involved in such deals, according to Irving Levin Associates Inc., a New Canaan, Conn.-based publisher of health-care information.
The increased number of hospital consolidations could be significant if the Federal Trade Commission wins its case against Evanston Northwestern Healthcare. In the trial that begins Thursday, the FTC alleges that the north suburban hospital operator unfairly raised prices after its 2000 takeover of Highland Park Hospital.
Evanston Northwestern, which also operates Evanston Hospital and Glenbrook Hospital in Glenview, denies the allegations in the lawsuit.
The FTC’s case is the first challenge of a hospital merger since 1997. A total of seven previous court challenges by either the FTC or the Justice Department were unsuccessful during the 1990s.
The FTC challenge of Evanston Northwestern’s merger with Highland Park could be significant and set the stage for additional challenges, analysts say.
If the FTC prevails in the case, it could force Evanston Northwestern to divest Highland Park.
“The FTC is trying to go and create a framework to challenge future hospital mergers,” said David Balto, a Washington lawyer and former FTC policy director. “Hospitals should be watching this case very closely because it will have a lot to do with future merger challenges the FTC makes.”
The number of hospitals involved in mergers had dipped to 55 in 2003. There were 98 hospitals involved in deals in 2002 and 118 in 2001.
“Merger activity has been picking up,” said Sandy Steever, editor of Irving Levin’s Health Care M&A Monthly, which tracks mergers in the health-care industry. “It is not up to the rock ‘n’ roll days of the mid-1990s, but we are beginning to see quite a number of deals going on.”
The amount of dollars committed to mergers and acquisitions is also on the rise, nearly quadrupling to $9.1 billion in 2004 from $2.3 billion in 2003. Much of that activity involved buyouts of large for-profit chains, but analysts say it shows that values of hospitals are rising despite looming spending reductions by federal and state health programs.