Judge orders breakup of hospital merger

Observers say the Illinois split might be the first of many such moves.

By Katherine Vogt, AMNews staff. Nov. 14, 2005.

In a possible bellwether case for the hospital industry, a federal judge has ruled that the 2000 merger of Evanston Northwestern Healthcare Corp. and Highland Park Hospital in suburban Chicago substantially decreased local health care competition and should be broken apart.

Chief Administrative Law Judge Stephen J. McGuire ruled in favor of the Federal Trade Commission in his Oct. 17 decision, saying the merger gave Evanston Northwestern unfair market clout that it used to its advantage. He ordered the health system to sell the hospital within 180 days.

But Evanston Northwestern officials vowed to appeal the ruling and said they wouldn't take any steps to divest the hospital or discontinue services in the interim. Appeals are expected to last up to two years.

Still, experts say the case, brought in February 2004, is a major victory for the FTC, which had not successfully challenged a hospital merger in nearly a decade. Legal experts said it should serve as a warning to other merged hospital systems that the FTC is scrutinizing the industry, which has undergone significant consolidation in recent years.

"The FTC has given the signal that just because the deal has closed doesn't mean they won't review it or challenge it," said J. Robert Robertson, an antitrust attorney in Chicago with Kirkland & Ellis LLP, who worked at the federal agency for about two years.

Evanston Northwestern bought the hospital for about $200 million in January 2000. It owned two other hospitals in north suburban Chicago.