FTC Challenge to Sanford Health/Mid Dakota Clinic Physician Group Merger and the Lesson For You

June 25, 2018

Like a bear emerging from its long winter nap, the Federal Trade Commission is hungry to enforce antitrust law in the healthcare sector, including, notably, in connection with monopolization through mergers in the market for physician services.

In 2017, the FTC challenged the proposed merger of physician group Mid Dakota Clinic into Sanford Health, an integrated healthcare system.

The government alleged that the deal would violate antitrust law by significantly reducing competition, resulting in higher prices and lower quality of care for adult primary care physician services, pediatric services, obstetrics and gynecology services, and general surgery physician services in the greater Bismarck and Mandan metropolitan area.

In December 2017, the FTC, acting together with North Dakota’s Attorney General, won a preliminary injunction in federal District Court blocking the merger. Sanford and Mid Dakota have appealed, and the case is currently winding its way through the appeal process.

Although the FTC has increased its scrutiny of physician group mergers, the merger of independent physician groups, that is, of groups not affiliated with hospital systems, continues to be an attractive alternative in the fight to build market share, especially in face of increasing competition from both integrated systems and national practice aggregators.

The lesson of increased scrutiny simply means that the parties to potential mergers must take antitrust law, both federal and state, into account at the earliest (that is, pre-planning) stages prior to any discussions with potential merger partners. What’s said and done even at the earliest stages of discussions can doom an otherwise pro-competitive arrangement.

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