Following a review of University of Pittsburgh Medical Center’s (UPMC) proposed acquisition of Washington Health System (WHS), the Office of the Pennsylvania Attorney General (OAG) announced on May 30 its approval of the transaction, subject to a settlement agreement “that addresses the [OAG’s] concerns about the transaction’s potential impact on patients, staff, and the community.” UPMC is a large, vertically integrated Pittsburgh-based health system that operates 40 hospitals with 8,700 beds, as well as a health insurance arm. WHS operates two community hospitals in Washington and Greene counties in Pennsylvania and more than 40 off-site outpatient locations and physician practices. The next day, the Federal Trade Commission’s (FTC) window to challenge the transaction lapsed after the FTC concluded its own investigation, clearing the way for the parties to close the acquisition and begin WHS’s integration into UPMC. 

Opponents to the deal, including the union of which about 200 current WHS employees are members, expressed concern that rural patients could lose network access after the merger and that workers may face job instability or overly restrictive covenants. To account for these concerns, the OAG conditioned clearance of the transaction on the parties’ agreement to various terms set forth in an Assurance of Voluntary Compliance. 

The terms, set to expire ten years after closing, include:

1. Information sharing and firewall requirements to prevent the flow of competitively sensitive rate information between the newly acquired hospitals and UPMC affiliates, including UPMC’s own health plan;
2. Procedures to ensure good faith negotiation with health plans seeking contract renewals or new contracts, including a single last best offer arbitration requirement to resolve any disputed terms; 
3. Limitations on UPMC’s ability to prohibit tiering or steering; 
4. Prohibitions on most favored nation clauses and exclusivity or bundling agreements for UPMC’s other hospitals and terminating existing payor contracts except for cause;
5. Employment conditions requiring UPMC to honor physician contacts and protect physicians, nurses, and non-medical staff from more restrictive non-competes than they are currently subject to; and
6. An assurance that the newly merged hospitals will remain open and accessible to nearby Pennsylvanians.

Regulators’ response to hospital deals remains an item to watch.

Authors for this post: Will Sheridan, Courtney Averbach, and Leah Hungerman