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From Antitrust Law Daily, November 29, 2018

FTC closes hospital merger probe after Massachusetts AG secures price caps

By Jeffrey May, J.D.

The proposed merger of Beth Israel Deaconess Medical Center (BIDMC) and Lahey Health System will proceed under a settlement with the Massachusetts attorney general, it was announced today. An assurance of discontinuance, filed in superior court in Suffolk County, will cap prices for the merged entity over a period of seven years. The merging entities also made $71.6 million in financial commitments to support health care services for low-income and underserved communities in the state. The FTC also issued a statement, saying that it was closing its investigation into the proposed deal in light of the state settlement and the Commission staff’s own review. The Commission warned, however, that it "will continue to keep a watchful eye on this and other health care transactions and take action as appropriate" (Massachusetts v. Beth Israel Lahey Health, Inc., Civil Action No. 2018-3703; Proposed Affiliation of CareGroup, Inc.; Lahey Health System, Inc.; Seacoast Regional Health System, Inc.; BIDCO Hospital LLC; and BIDCO Physician LLC, FTC File No. 171-0118).

Boston-based BDIMC and Lahey Health, based in Burlington, Massachusetts, will combine to form to form the Beth Israel Lahey Health system. For seven years following the merger, BILH will operate under a price cap that guarantees the merged entity’s price increases will be kept below the state’s Health Care Cost Growth benchmark, a state-set goal to control the annual growth of total medical spending currently set at 3.1 percent. Over the seven-year term, the cap is projected to avoid more than $1 billion of the potential cost increases, the state contends. In addition to the price caps and financial commitments, the merged entity also agreed to make good faith efforts to enroll all licensed providers in MassHealth within three years and submit a plan to do so within 18 months. A third-party monitor must be retained to ensure compliance with the terms of the settlement.

FTC investigation. According to the Commission’s statement, the FTC worked closely with the Massachusetts attorney general staff during the investigation. The cooperation was described as a "textbook example of a productive partnership between state and federal agencies."

While states other than Massachusetts have cleared hospital mergers subject to price cap obligations, the FTC noted that it generally does not pursue behavioral remedies, such as price caps, in merger cases. The FTC, however, recognized the state’s goals of preserving access to health care for underserved populations and limiting price increases for health care consumers. The agency also suggested that the transaction might "provide a good opportunity for a retrospective study of merger effects, including the effects of efficiencies."

CareGroup, Inc. is the parent company of BIDMC, Mount Auburn Hospital, and New England Baptist Hospital. BIDMC is a patient care, teaching, and research affiliate of Harvard Medical School. Lahey Health includes Lahey Hospital & Medical Center—a teaching hospital of Tufts University School of Medicine. The parties disclosed their letter of intent to investigate a combination back in January 2017.

Companies: Beth Israel Deaconess Medical Center, Inc.; CareGroup, Inc.; Lahey Health System, Inc.

MainStory: TopStory AcquisitionsMergers Antitrust FederalTradeCommissionNews MassachusettsNews

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