In 2022, the agency responsible for competition regulation successfully blocked multiple hospital mergers, but in high-profile deals, regulators did not challenge the mega-merger of Advocate Aurora Health in the Midwest and Atrium Health in the South.

A challenge would have represented a rare attempt by the Federal Trade Commission (FTC) to block so-called "cross-market" mergers in healthcare.

Instead, regulators continued to challenge provider deals they have historically opposed, raising questions about their antitrust enforcement in an evolving industry where deals have moved beyond traditional geographic markets.

"It would be reckless to conclude from this that the FTC will stop investigating this area," said Mike Cowie, a partner at Dechert, referring to cross-market deals.

Cowie, who previously led antitrust merger investigations at the FTC, noted that the FTC has successfully blocked deals between direct competitors, but cross-market deals are more challenging.

The Advocate-Atrium deal offered the FTC an opportunity to challenge a merger of health systems with no geographic overlap. Advocate-Atrium's facilities span six states, and their respective hospitals do not compete for the same patients in the same markets.

Challenging competitors that compete in the same geographic market has been a hallmark of past FTC challenges.

Nevertheless, researchers have expressed concerns about the potential impact of cross-market deals on healthcare prices.

A 2019 study found that after systems acquired hospitals in different markets within the same state, pricescould rise by up to 10%. Researchers found that these providers had greater bargaining power with insurers after the mergers.

But the authors of the paper argue that antitrust enforcement has not kept pace. Current methods for identifying anticompetitive deals assume prices will not rise unless providers are "actively competing to offer the same services to the same patient population." However, researchers argue that current thinking should be extended to insurers.

"Because insurers serve employers across multiple geographic regions, merged cross-market hospital systems covering those regions can demand higher reimbursement rates from insurers," the researchers said.

Cross-market deals are not uncommon.

Researchers said that between 2010 and 2012, more than half of hospital mergers involved hospitals or systems with no facilities in the same metropolitan statistical area.

The Advocate-Atrium deal wascompleted in Decemberwithout an FTC challenge. The merger created the fifth-largest nonprofit health system, with $27 billion in annual revenue and 67 hospitals.

"This marks a continuing wave of mergers, with hospitals believing that greater scale brings a stronger position for success," said Leemore Dafny, a Harvard professor and one of the authors of the cross-market research.

The FTC's healthcare challenges this year show the agency is "focusing on the devil it knows," said Pahl Zinn, an attorney at Dickinson Wright in Detroit.

Antitrust lawyers say the FTC's current merger guidelines do not address cross-market mergers. Zinn said the agency needs to adjust its analytical tools to address such cases.

"Many judges rely heavily on the merger guidelines when assessing whether a deal is illegal," said Jim Burns, a partner at Williams Mullen and chair of its antitrust practice group.

Burns compared the merger guidelines to federal sentencing guidelines, which aim to apply uniform standards.

Antitrust regulators are seeking to modernize these guidelines, which have not been updated in 12 years. As part of that effort, they have called for public comments.

The FTC did not respond to a request for comment on the progress of that process.

Nevertheless, the agency blocked several hospital mergers this year.

Rhode Island's first- and second-largest providers abandoned their merger plans after facing an FTC lawsuit; HCA also abandoned its acquisition of Utah competitor Steward Health Care System; RWJBarnabas Health canceled its plan to acquire Saint Peter's Healthcare in New Jersey.

Overall, however, the Biden administration has not had much success in antitrust cases brought in court, including challenges covering all industries, not just healthcare.

Antitrust regulators won their first victory under the Biden administration in federal court in October, when a judge sided with the Department of Justice to block book publisher Penguin Random House's $2 billion acquisition of rival Simon & Schuster.

Previously, the administration suffered two consecutive federal court losses, including a challenge to UnitedHealth's acquisition of Change Healthcare. According to Dechert's latest quarterly report on antitrust enforcement, until the publishing case victory, "neither the DOJ nor the FTC had won a case filed in federal district court under the Biden administration."

Williams Mullen's Burns said that even though regulators have mostly been unsuccessful in court, they still have an impact.

"You could say they have changed how people think about mergers," Burns said. "I think merging parties are doing more soul-searching before merging."