Until very recently, most litigators would envy the enforcement record of the Federal Trade Commission in hospital merger cases. But the agency’s losses in Federal Trade Commission v. Penn State Hershey Medical Center et al., No. 15-2362 (M.D. Pa. May 9, 2016), and Federal Trade Commission v. Advocate Health Care et al., No. 15-cv-11473 (N.D. Ill. June 14, 2016), if not overturned, likely will have a significant impact on the FTC’s efforts to slow the record pace of health care provider consolidation.

At the end of 2015, over a six-week period, the FTC sought to block three hospital mergers in three different states. The FTC’s winning streak ended when a federal district court denied the FTC and Pennsylvania attorney general’s request in Penn State Hershey to enjoin a merger between Penn State Hershey Medical Center and PinnacleHealth System.

If left to stand, the decision would threaten the FTC’s litigating positions in pending and future cases; so it is no surprise that the FTC appealed the decision to the Third Circuit Court of Appeals. The Third Circuit’s decision will have a significant impact on hospital merger enforcement going forward, as it will necessarily examine the FTC’s approach to geographic market definition in hospital mergers (to which the FTC has credited its winning streak).

The Third Circuit will decide several key issues that will impact the FTC’s enforcement agenda and how health care providers approach mergers. The most significant questions that Penn State Hershey presents pertain to the FTC’s approach to defining geographic markets.

The case marks the first time that a court has reasoned that the evolving health care landscape, particularly the forces of the Affordable Care Act, should temper the FTC’s enforcement agenda. If the Third Circuit decides to tackle this issue, what it says could have seismic effects on the FTC’s health care enforcement agenda. The health care community should be watching.

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