The Federal Trade Commission and the Pennsylvania attorney general will appeal a federal judge’s decision to allow Thomas Jefferson University’s acquisition of Einstein Healthcare Network — if the district court judge agrees to stay his decision to allow the deal to go forward.
The appeal to the Third Circuit Court of Appeals could delay for many months the completion of the merger, which was first announced in March 2018. And it has the health-care community wondering if the two health systems will continue the fight as the pandemic continues to exact a stiff financial toll on hospitals here and across the country.
Jefferson said it intends to do all it can to see the deal through.
“It is unfortunate that at a time when Jefferson and Einstein are providing care to large concentrations of COVID-19 patients and underserved populations that we are being forced to spend tens of millions of dollars to defend our merger,” Stephen K. Klasko, Jefferson’s chief executive, and Barry Freedman, who has the same job at Einstein, said in a joint statement.
Jefferson could complete its acquisition of Einstein as soon as next Wednesday if a stay is not granted, according to the FTC’s motion.
A stay is needed because on Tuesday, U.S. District Judge Gerald J. Pappert rejected a bid by the FTC and the Pennsylvania attorney general to temporarily block Jefferson’s acquisition of Einstein Healthcare Network.
Pappert concluded that the FTC’s case failed to mesh with the reality of the Philadelphia-area health-care market and relied on testimony from health insurers that was “not credible,” according to a 62-page decision that came after six days of testimony in September.
In their motion filed Wednesday evening, the FTC and the Attorney General’s Office criticized Pappert for focusing on “amorphous” commercial realities — which in Pappert’s view has Penn Medicine and Jefferson as chief rivals in the region — instead of on technical definitions of monopoly in the narrow markets proposed by the FTC.
The stakes are high. If Pappert’s ruling stands, Jefferson would cement its position as the largest hospital network in the Philadelphia area and give it a chance to radically change the region’s health-care marketplace by integrating with an insurance company it partly owns.
The deal also would throw a lifeline to financially struggling Einstein, which has said it needed the merger to stay afloat.
Einstein has had operating losses in five of its last six fiscal years. It was portrayed by Einstein’s financial expert Todd Patnode as a system “that has degraded and deteriorated to a point that it will not be able to continue as a viable stand-alone entity and continue to provide like services and quality” unless the merger proceeds.
Jefferson itself is trying to battle back from a nearly $300 million operating loss in the year ended June 30 — a huge deficit despite $325 million in government COVID-19 aid. Despite that loss and continued weak profits, Moody’s Investors Service last week lifted its financial outlook on Jefferson to stable from negative.
Pappert focused his analysis on whether health insurers would be forced to accept price increases for hospital care or could rely on hospitals outside their immediate market area to avoid price increases.
The impact on consumers is a secondary consideration in such antitrust cases because consumers typically pay for health care through insurers.
Cigna and Independence Blue Cross executives testified that they “would have to succumb to a price increase” for hospital services if Jefferson and Einstein merged, Pappert wrote. He described those assertions as “not credible,” particularly in the case of Independence, which evidence showed has repeatedly considered excluding particular providers from its network.