As part of ongoing hospital merger enforcement efforts, the Federal Trade Commission (FTC) filed on February 28, 2020, an administrative complaint in an effort to block Thomas Jefferson University’s acquisition of Albert Einstein Healthcare Network. In addition to the administrative proceeding, the FTC, joined by the Pennsylvania attorney general, intends to seek a temporary restraining order and preliminary injunction to prevent the acquisition in the United States District Court for the Eastern District of Pennsylvania.

According to the complaint, Jefferson is the largest health system by hospital beds in the greater Philadelphia region. The health system operates 11 general acute care (GAC) hospitals and over 50 outpatient and urgent care locations in Pennsylvania and New Jersey, as well as three inpatient rehabilitation facilities (IRFs) in Pennsylvania. The FTC’s administrative litigation follows four prior hospital system acquisitions by Jefferson since 2015, and recent federal regulatory action resulting in Jefferson’s cancellation of a $55 million agreement to acquire Hahnemann University Hospital’s residency programs. Also according to the complaint, Einstein, a health system headquartered in North Philadelphia, operates three GAC hospitals, five IRFs and 15 outpatient centers in the Philadelphia and Montgomery County area. The proposed acquisition has been pending since 2018.

The FTC’s complaint alleges that the transaction would violate Section 5 of the FTC Act and Section 7 of the Clayton Act, which prohibit acquisitions that substantially lessen competition or tend to create a monopoly. Specifically, the FTC claims that the transaction threatens substantial harm to competition in both the inpatient GAC hospital services market in the North Philadelphia and Montgomery County areas, as well as the inpatient acute rehabilitation services market in the Philadelphia area. According to the complaint, the merger of Jefferson and Einstein would result in Jefferson’s control of at least 60 percent of the GAC hospital services market in North Philadelphia and 45 percent of the same market in the Montgomery County area. The FTC alleges that, post-transaction, Jefferson would control at least 70 percent of the inpatient acute rehabilitation services market in the Philadelphia area.

The FTC has a long history of challenging mergers in the healthcare industry. At least one recent estimate concluded that “nearly half of all FTC merger challenges between 2000 and 2018 involved the healthcare industry, a significant portion of which focused on healthcare providers generally and hospitals in particular.” This latest move by the FTC is consistent with its apparent initiative to remain aggressive in pursuing hospital merger cases, including cases involving litigation risks and hospitals that are financially struggling.