McLaren sues ProMedica over alleged retaliation following St. Luke’s buy

UPDATE: Nov. 12, 2020: In a statement to Healthcare Dive, Promedica said it “looks forward to demonstrating that this frivolous lawsuit from an out-of-state health care system lacks any merit and was filed solely to tarnish ProMedica’s reputation.”

Dive Brief:

  • Michigan-based McLaren Health Care is suing Toledo, Ohio-based ProMedica over allegations that ProMedica retaliated against McLaren for buying a competitor, St. Luke’s Hospital, which is located in the Toledo area.
  • One day after McLaren finalized its acquisition of St. Luke’s, ProMedica’s insurance arm, Paramount, terminated commercial and Medicare Advantage contracts with St. Luke’s and its physicians, effective Jan. 1, according to a complaint filed in federal court this week. ProMedica also operates hospitals in Michigan and terminated its contracts with McLaren Health Plan.
  • McLaren alleges this action will undermine competition in the Toledo area, seriously injure St. Luke’s and deprive a large number of patients access to their preferred providers.

Dive Insight:

This is not the first time ProMedica has come under legal fire over its dealings with St. Luke’s.

ProMedica previously consummated a deal in 2010 with rival St. Luke’s only to have it challenged by the attorney general of Ohio and the Federal Trade Commission over anticompetitive concerns. The deal shifted the market from having four hospitals to just three.

After a yearslong legal tussle, ProMedica ultimately lost and had to unwind its purchase of St. Luke’s after losing an appeal at the Sixth Circuit. ProMedica tried to sway the U.S. Supreme Court to hear the case, but the high court refused. It was a legal battle closely watched by the industry, which is generally keen on mergers and acquisitions.

It’s unclear whether the recent actions by ProMedica will again attract FTC scrutiny.

During the previous legal battle, ProMedica had entered into a “hold separate agreement” with the FTC to ensure that it did not integrate St. Luke’s into its operations. The agreement also barred ProMedica from terminating St. Luke’s contracts with health plans.

McLaren alleges that the divestiture left St. Luke’s with enormous debt and obstacles to operating profitably. McLaren says that it has already committed to investing $100 million that will make it “a more significant competitor to ProMedica, the dominant health care system in Lucas County.”

A similar tussle occurred last year between healthcare giants and rivals UPMC and Blue Cross Blue Shield system Highmark in Pennsylvania. It attracted involvement from the state’s top cop, Attorney General Josh Shapiro.