Friday, October 20, 2023–9:11 a.m.
-John Bailey, Rome News-Tribune-
This story is possible because of a news-sharing agreement with the Rome News-Tribune. More information can be found at northwestgeorgianews.com
As it appeared a merger between Atrium Health Floyd and the Harbin Clinic was near finalization, the Federal Trade Commission stepped in to take a closer look at the proposal.
An internal Harbin Clinic email obtained by the Rome News-Tribune this week states that the FTC is seeking a closer look at the merger plans — however, Harbin CEO Kenna Stock says the clinic and Atrium remain committed to the deal.
“We, and Atrium, will continue to work cooperatively and productively with the FTC to provide this information, as we remain confident about the benefits of the transaction with the clinic, its physicians and our community,” Stock wrote in the email. “This, however, will take additional time. We recognize this is a tremendous disappointment to all of you as it is to the clinic’s leadership.”
Continuing, Stock wrote that they don’t have an estimated closing date for the deal. Industry insiders say that it’s possible the second look by the FTC could push the deal back by six months to as far as two and a half years.
While that long of a delay in and of itself could torpedo the deal, the review itself is not necessarily a death knell.
Both parties this week stated they remain firm in their resolve to see the deal through.
“Atrium Health Floyd and Harbin Clinic are committed to continue to work together to care for the needs of the patients we both serve,” a statement from Atrium Health Floyd to the Rome News-Tribune reads. “We respect the Federal Trade Commission’s process and appreciate the opportunity to participate in it.”
Why is this review important?
Healthcare merger reviews have become more commonplace in the past year through an executive order issued by President Joe Biden.
In 2022, the president directed the FTC and other federal agencies to take a closer look at proposed healthcare mergers, which have been rampant in the past several years.
In Floyd County alone, the two hospital systems were purchased by larger conglomerates — Atrium Health, now Advocate Health after yet another massive merger, purchased the Floyd Healthcare System. That deal also included the Floyd hospitals in Polk County and Cherokee County, Alabama. AdventHealth purchased Redmond Regional Medical Center from HCA. Cartersville Medical Center was also offloaded by HCA and purchased by Piedmont Healthcare. Additionally, two urgent care facilities that were previously under the HCA/Redmond branding are now under the Piedmont branding.
Looking at the overall market, President Biden stated that mergers and acquisitions placed a quarter of the healthcare market control in the hands of 10 healthcare systems. The Kaiser Family Foundation reported that those mergers and consolidations led to the closure of hospitals in many rural and underserved areas.
Why the review? It’s simple economics: Fewer options lead to higher prices. In this case, higher healthcare prices and potentially higher insurance premiums. This hasn’t been the case in Floyd County because of the concentration of competitive services.
One of the reasons for a merger is what Floyd CEO Kurt Stuenkel referred to as “economies of scale” — meaning if you’re part of a larger healthcare conglomerate then you’ve got much bigger buying power.
However, some experts are saying those cost reductions aren’t being passed down to patients.
“Instead, prices have climbed as more and more healthcare providers have gained market power through mergers and acquisitions,” professor David Dranove of Northwestern University’s Kellogg School of Management wrote. Dranove also co-authored “Big Med: Megaproviders and the High Cost of Health Care in America”chronicling this issue for consumers.
Research points to the correlation of consolidations with higher healthcare prices and insurance premiums. That’s a risk in Northwest Georgia as well. As healthcare conglomerates make decisions based on the bottom line, locations with more rural populations often suffering.
What’s the process?
Whenever two healthcare companies report a proposed deal, the FTC or Department of Justice will do a preliminary review to determine whether it raises any antitrust concerns that warrant closer examination.
Based on the findings of that review it can give it the immediate go ahead, allowing the transaction to occur after a waiting period. According to the FTC, the vast majority of deals are allowed to proceed after the first, preliminary review.
The third option, as in this case, is if that review has raised a concern regarding competition, the agency can opt to take a closer look at how the merger will affect competitive practices in the area. Since Harbin physicians served both Atrium Health Floyd and AdventHealth Redmond, this is likely one of the issues that raised concern.
The FTC doesn’t comment on specific reviews, a spokesperson for the agency told the Rome News-Tribune.
Regardless, a second request by the FTC is more involved that the first review. Once that process is completed the agency has three options: Close the investigation — at which point the deal is allowed to move forward — or enter into a settlement with the companies, or take legal action to block the deal in U.S. District Court or through the agency’s administrative process.