WASHINGTON (Reuters) - NorthShore University HealthSystem said on Tuesday it was scrapping plans to merge with another Chicago hospital system after losing a court fight with U.S. antitrust regulators who said the merged hospital system would control more than half the area’s general acute care inpatient services.
NorthShore said in a statement that a federal judge had ruled for the Federal Trade Commission, which argued that NorthShore’s deal to merge with Advocate Health Care violated U.S. antitrust law and would harm consumers by hiking healthcare costs and reducing incentives to upgrade services and improve quality, according to the December, 2015 complaint.
The FTC said it was pleased with the decision.
“The FTC is delighted with today’s district court ruling, which enjoined this merger, and the parties’ subsequent decision to abandon the transaction,” said Tad Lipsky, acting director of the commission’s bureau of competition.
“Advocate and NorthShore’s merger would likely have reduced the quality, and increased the cost, of health care for residents of the North Shore area of Chicago,” Lipsky said in a statement.
Judge Jorge Alonso of the U.S. District Court for the Northern District of Illinois had initially ruled in favor of the companies but the FTC won on appeal. The case was sent back to Alonso, who reversed himself and ruled for the agency, the companies said.
The hospital systems said that they would not appeal.
“We have determined with the Advocate Health Care leadership that the time, cost, and uncertainty of pursuing any additional appeals would not be worthwhile,” NorthShore said in a statement.
Advocate put out a similar statement.
Advocate and NorthShore announced plans to merge in September 2014. Advocate is in Downers Grove, a suburb west of Chicago while NorthShore is in Evanston, a northern suburb.
The FTC had said the merged hospital system would control 55 percent of the area’s general acute care inpatient services. The hospitals argued that the federal agency’s analysis had improperly failed to include competitors such as Northwestern Memorial Hospital.
Financial terms of the deal were not disclosed.
The FTC, which works with the U.S. Department of Justice to enforce antitrust law, has struggled lately to enforce its decisions. Still, the agency did win high-profile fights to stop Sysco Foods from merging with rival US Foods in 2015 and in 2016 blocked Staples from merging with Office Depot.
Reporting by Diane Bartz; Editing by David Gregorio