Case: 1:15-cv-11473 Document #: 320 Filed: 04/04/16 Page 1 of 4 PageID #:17454

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FEDERAL TRADE COMMISSION,
and
STATE OF ILLINOIS
Case No.: 1:15-cv-11473
Judge Jorge L. Alonso
Mag. Judge Jeffrey Cole

Plaintiffs,
v.
ADVOCATE HEALTH CARE NETWORK,
ADVOCATE HEALTH AND HOSPITALS CORP.,
and
NORTHSHORE UNIVERSITY HEALTHSYSTEM,
Defendants.

NOTICE OF OFFER OF JUDGMENT

Defendants Advocate Health Care Network, Advocate Health and Hospitals Corp. (Advocate) and NorthShore University HealthSystem (NorthShore), (collectively, Defendants), hereby notify the Court that on March 23, 2016 and pursuant to Fed. R. Civ. P. 68 they
sent a letter to Plaintiffs offering to allow judgment to be taken against them in this action on the
terms specified in a Proposed Final Judgment attached to that letter. See Ex. A.
Defendants offer of judgment was made for the purposes specified in Rule 68, and is not
to be construed as an admission that the Defendants are liable in this action. Defendants remain
of the view that the proposed transaction between Advocate and NorthShore does not violate 15

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U.S.C. 18, or any other federal or state antitrust statute. To date Plaintiffs have not responded
to Defendants Offer of Judgment.

Dated: April 4, 2016

Respectfully submitted,
/s/ Robert W. McCann
Robert W. McCann, Esq.
Kenneth M. Vorrasi, Esq.
John L. Roach, IV, Esq.
Jonathan Todt, Esq.
Drinker Biddle & Reath LLP
1500 K Street, N.W., Suite 1100
Washington, D.C. 20005
Phone: (202) 230-5149
Fax: (202) 842-8465
Robert.McCann@dbr.com
Kenneth.Vorrasi@dbr.com
Lee.Roach@dbr.com
Jon.Todt@dbr.com

John R. Robertson, Esq.

Leigh Oliver, Esq.
Hogan Lovells US LLP
555 13th Street, NW
Washington, DC 20004
Telephone: (202) 637-5774
Email: robby.robertson@hoganlovells.com
Email: leigh.oliver@hoganlovells.com
Counsel for Defendants Advocate Health
Care Network and Advocate Health and Hospitals Corp.
/s/ David E. Dahlquist
David E. Dahlquist, Esq.
Michael S. Pullos, Esq.
Winston & Strawn LLP
35 W. Wacker Drive
Chicago, IL 60601
Phone: (312) 558-5660
Fax: (312) 558-5700
DDahlquist@winston.com
MPullos@winston.com
2

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Counsel for Defendant NorthShore University HealthSystem

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CERTIFICATE OF SERVICE
I hereby certify that on April 4, 2016 I caused a copy of the foregoing Notice of Offer of
Judgment to be filed and served on all counsel of record via the Courts electronic filing system.

/s/ John L. Roach IV

John L. Roach IV, Esq.

Case: 1:15-cv-11473 Document #: 320-1 Filed: 04/04/16 Page 1 of 10 PageID #:17458

Robert W. McCann
Partner
202-230-5149 Direct
202-842-8465 Fax
robert.mccann@dbr.com
Law Offices

March 23, 2016

1500 K Street N. W.
Suite 1100
Washington, D.C.
20005-1209
(202) 842-8800
(202) 842-8465 fax
www.drinkerbiddle.com
CALIFORNIA
DELAWARE
ILLINOIS
NEW JERSEY
NEW YORK
PENNSYLVANIA

Via Electronic Mail

J. Thomas Greene, Esq.
Sean P. Pugh, Esq.
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
jgreene@ftc.gov
spugh@ftc.gov

WASHINGTON D.C.

Re:

WISCONSIN

Federal Trade Commission and State of Illinois v. Advocate Health

Care Network, et al.: 15-cv-11473

Dear Tom and Sean:

On February 18, pursuant to Fed. R. Civ. P. 68, we proposed terms to you under which
the Defendants would agree to settle the claims in the FTCs Complaint and terminate the
proceedings now pending in the Northern District of Illinois and before the Commission.
We write today to confirm that offer and enclose a proposed order as a Fed. R. Civ. P. 68
Offer of Judgment.
Very truly yours,

Robert W. McCann
cc:

Established 1849

David E. Dahlquist, Esq.

J. Robert Robertson, Esq.

Case: 1:15-cv-11473 Document #: 320-1 Filed: 04/04/16 Page 2 of 10 PageID #:17459

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FEDERAL TRADE COMMISSION
and
STATE OF ILLINOIS,
Plaintiffs,
v.

Case No.: 15-cv-11473

Judge Jorge L. Alonso
Magistrate Judge Jeffrey Cole

ADVOCATE HEALTH CARE NETWORK,

ADVOCATE HEALTH AND HOSPITALS
CORPORATION,
and
NORTHSHORE UNIVERSITY
HEALTHSYSTEM,
Defendants.

[PROPOSED] FINAL JUDGMENT

WHEREAS, Plaintiffs Federal Trade Commission and State of Illinois filed their
Complaint on December 21, 2015, alleging that the proposed merger between Defendants
Advocate Heath Care Network (Advocate) and NorthShore University Health System
(NorthShore) would violate Section 7 of the Clayton Act, 15 U.S.C. 18 by reducing
competition for certain inpatient general acute care hospital services within an alleged
geographic market containing the four NorthShore hospitals and two Advocate hospitals, and
alleging that the merger would lead to increases in the prices paid by commercial health plans for
inpatient hospital services;
1

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AND WHEREAS, Defendants have made an Offer of Judgment pursuant Fed. R. Civ. P.
68 and submitted a Proposed Final Judgment to reflect that offer;
AND WHEREAS, Plaintiffs and Defendants, by their respective attorneys, have
consented to the entry of this Final Judgment without trial or adjudication of any issue of fact or
law;
AND WHEREAS, Defendants will agree to undertake certain actions and refrain from
certain conduct for the purpose of remedying the anticompetitive effects alleged in the
Complaint;
NOW THEREFORE, before any testimony is taken, without this Final Judgment
constituting any evidence against or admission by Defendants regarding any issue of fact or law,
and upon consent of the parties to this action, it is ORDERED, ADJUDGED, AND DECREED:
I.

JURISDICTION

This Court has jurisdiction over the subject matter of and each of the parties to this
action. The Complaint states a claim upon which relief may be granted against the Defendants
under Section 7 of the Sherman Act, 15 U.S.C. 18.
II.

DEFINITIONS

As used in this Final Judgment:

(A)

Advocate means Defendants Advocate Health Care Network and Advocate

Health and Hospitals Corporation, each an Illinois nonprofit corporation, and their respective
successors, assigns, and controlled subsidiaries and affiliates.
(B)

ANHP means Advocate NorthShore Health Partners, the entity created by the

merger of Advocated Health Care Network and NorthShore University HealthSystem.

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(C)

ANHP Hospital means Christ Medical Center, Condell Medical Center,

Evanston Hospital, Glenbrook Hospital, Good Samaritan Hospital, Good Shepherd Hospital,
Highland Park Hospital, Illinois Masonic Medical Center, Lutheran General Hospital, Sherman
Hospital, Skokie Hospital, South Suburban Hospital, and Trinity Hospital.
(D)

Annual means on the period coinciding with the ANHP fiscal year, to wit, each

twelve-month period beginning January 1 and ending December 31.

(E)

CPI-U means the Consumer Price Index For All Urban Consumers calculated

by the United States Bureau of Labor Statistics.

(F)

Fee-For-Service Contract means a Payor Contract under which payment for

Inpatient Hospital Services is made on a basis other than a Risk-Based Payment.

(G)

Independent Auditor means an accounting or consulting firm reasonably

acceptable to the Federal Trade Commission.

(H)

Inpatient Hospital Services means inpatient acute care services provided by an

ANHP Hospital.
(I)

NorthShore means Defendant NorthShore University HealthSystem, an Illinois

nonprofit corporation and its successors, assign, and controlled subsidiaries and affiliates.
(J)

Payor means a non-governmental sponsor or underwriter of a health insurance

plan or prepaid medical plan.

(K)

Payor Contract means a contract between ANHP (or an ANHP subsidiary) and

a Payor.
(L)

Risk Based Payment means a payment arrangement under which ANHP bears

all or a portion of the insurance risk that otherwise would be borne by the Payor for the cost of
services provided to the members of a health plan, including without limitation: (i) capitation

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payment, to wit, payment on the basis of a fixed periodic per-member amount that is independent
of the quantity of health services actually used by that member in that period; (ii) budgeted
payment, to wit, an arrangement under which fee-for-service or other unit-of-service based
payments for health services to a defined population during a period are reconciled against a
budgeted total expenditure amount for the period, and under which the provider must repay all or
a portion of any amount by which actual expenditures exceed the budget for that period; and (iii)
bundled payment, to wit, a single comprehensive payment made for a group of related services,
based on the expected costs for a clinically-defined episode of care.
III.

PROHIBITED CONDUCT

Until the expiration of this Final Judgment, commencing with the Annual period
beginning on January 1, 2017, ANHP shall not cause the aggregate rates for Inpatient Hospital
Services charged under any Fee-For-Service Contract at any ANHP Hospital to increase on an
Annual basis at a rate that exceeds the greater of (i) the rate of increase in the CPI-U for the same
Annual period or (ii) 1.0%.
IV.
(A)

REQUIRED CONDUCT

Within 90 days following the end of each Annual period, commencing with the

Annual period beginning on January 1, 2017, ANHP shall submit to the Federal Trade
Commission the report of an Independent Auditor (the Report) documenting the rate of
increase under Fee-For-Service Contracts in the prior Annual period, such Report to be prepared
solely at the expense of ANHP.
(B)

If the Report demonstrates compliance with Section III of this Final Judgment,

ANHP shall also submit a certification of compliance signed by an officer of ANHP.

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(C)

In the event that the Report demonstrates that ANHP has not fully complied with

Section III in the preceding Annual period, the Report shall identify each Payor that received a
rate increase in excess of that permitted by Section III and the amount of each such Payors
excess rate increase (the Excess Rate Increase). Within 90 days following the submission of
the Report, ANHP shall:
(1)

Refund each such Excess Rate Increase in full to the applicable Payor;

(2)

Agree to rate adjustments under each Fee-For-Service Contract for which

an Excess Rate Increase occurred reasonably calculated to prevent an Excess Rate

Increase in the succeeding Annual period; and
(3)

Certify compliance with this Section IV(C) to the Federal Trade

Commission. Such certification shall be given by an officer of ANHP, and shall contain
a description of all actions taken to comply with this Section IV(C).
(D)

On an Annual basis, beginning with the Annual period ending in 2017, ANHP

shall produce and make available to the public a report of its performance on industry-standard
quality and safety measures, including the individual performance of each ANHP Hospital.
V.
(A)

ENFORCEMENT AND INSPECTION

For purposes of determining or securing compliance with this Final Judgment, or

of any related orders, or of determining whether the Final Judgment should be modified or
vacated, and subject to any legally recognized privilege, from time to time authorized
representatives of the Federal Trade Commission, including consultants and other retained
persons, shall, upon written request and reasonable notice to Defendants, be permitted:
(1)

access during Defendants office hours to inspect and copy, or at the

option of the Federal Trade Commission, to require Defendants to provide hard copy or

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electronic copies of, all books, ledgers, accounts, records, data, and documents in the
possession, custody, or control of Defendants, relating to any matters contained in this
Final Judgment; and
(2)

to interview, either informally or on the record, Defendants officers,

directors, employees, or agents, who may be represented by counsel, regarding such

matters. The interviews shall be subject to the reasonable convenience of the interviewee
and without restraint or interference by Defendants.
(B)

No information or documents obtained by the means provided in Section V(A)

shall be divulged by the Federal Trade Commission to any person other than an authorized
representative of the Federal Trade Commission, except as required by law, court rule, or court
order in the course of legal proceedings to which the Federal Trade Commission is a party, or for
the purpose of securing compliance with this Final Judgment, or as otherwise required by law. If
at the time information or documents are furnished by Defendants to the Federal Trade
Commission, Defendants represent and identify in writing the material in any such information
or documents to which a claim of protection may be asserted under Rule 26(c)(1)(G) of the
Federal Rules of Civil Procedure, and Defendants mark each pertinent page of such material,
Subject to claim of protection under Rule 26(c)(1)(G) of the Federal Rules of Civil Procedure,
then the Federal Trade Commission shall give Defendants ten calendar days notice prior to
divulging such material in any legal proceeding.
(C)

ANHP further consents to enforcement of this Final Judgment in arbitration by

any Payor to remedy an Excess Rate Increase. Any such arbitration proceeding shall be held in
Chicago, Illinois, and conducted through, and under the Commercial Arbitration Rules of, the
American Arbitration Association (AAA).

Arbitration shall be commenced by completing

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and filing with AAA a Demand for Arbitration form in accordance with the Commercial
Arbitration Rules setting forth a description of the dispute, and an estimation of the amount in
dispute, and sending notice of the Demand to ANHP. The arbitration shall be held before a
single arbitrator, who shall be selected by agreement of the ANHP and the Payor within 30 days
of the date the Demand for Arbitration is filed. If the ANHP and the Payor are unable to agree
on the selection of an arbitrator within such time, AAA shall select an independent arbitrator.
The arbitrator may not certify a class or conduct class-based arbitration. The arbitrator may not
vary or ignore the terms of this Final Judgment. Unless otherwise agreed by the Payor and
ANHP, the decision of the arbitrator shall be rendered within 90 days of the date that the
arbitrator is appointed. The decision of the arbitrator shall be final and binding on ANHP and
the Payor. The award of the arbitrator may be confirmed or enforced by this Court.
VI.

RETENTION OF JURISDICTION

This Court retains jurisdiction to enable any party to this Final Judgment to apply to this
Court at any time for further orders and directions as may be necessary or appropriate to carry
out or construe this Final Judgment, to modify any of its provisions, to enforce compliance, and
to punish violations of its provisions.
VII.

EXPIRATION OF FINAL JUDGMENT

Unless this Court grants an extension, this Final Judgment shall expire seven (7) years
from the date of its entry. Upon the motion of Plaintiff Federal Trade Commission, this Court
may extend such period if the Court finds that Defendants have materially failed to comply with
the terms of this Final Judgment during its effective period.

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VIII. NOTICE
For purposes of this Final Judgment, any notice or other communication required to be
filed with or provided to the Federal Trade Commission shall be sent to the person at the
addresses set forth below (or such other address as the United States may specify in writing to
any Defendant):
[to be inserted]
[copy to State of Illinois]
IX.

PUBLIC INTEREST DETERMINATION

Based upon the record before the Court, entry of this Final Judgment is in the public
interest.
Dated: _________________
_____________________________
United States District Judge

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CERTIFICATE OF SERVICE
The undersigned, an attorney, certifies that Defendants Proposed Final Judgment was
served this 23rdth day of March, 2016, upon the following counsel via email:
J. Thomas Greene, Esq.
Kevin Hahm, Esq.
Sean P. Pugh, Esq.
Jennifer Milici, Esq.
Federal Trade Commission
Bureau of Competition
600 Pennsylvania Avenue, N.W.
Washington, DC 20580
Phone: (202) 326-5196
Fax: (202) 326-2286
tgreene2@ftc.gov
khahm@ftc.gov
spugh@ftc.gov
jmilici@ftc.gov
Counsel for Plaintiff Federal Trade Commission
Robert W. Pratt, Esq.
Blake Harrop, Esq.
Office of the Attorney General
State of Illinois
100 West Randolph Street
Chicago, IL 60601
Phone: (312) 814-3000
Fax: (312) 814-4209
rpratt@atg.state.il.us
bharrop@atg.state.il.us
Counsel for Plaintiff State of Illinois
/s/ Robert W. McCann
Robert W. McCann, Esq.

Case: 1:15-cv-11473 Document #: 320-2 Filed: 04/04/16 Page 1 of 3 PageID #:17468

Robert W. McCann
Partner
202-230-5149 Direct
202-842-8465 Fax
robert.mccann@dbr.com
Law Offices

February 18, 2016

1500 K Street N. W.
Suite 1100
Washington, D.C.
20005-1209
(202) 842-8800
(202) 842-8465 fax
www.drinkerbiddle.com
CALIFORNIA
DELAWARE
ILLINOIS

J. Thomas Greene, Esq.

Sean P. Pugh, Esq.
Bureau of Competition
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
jgreene@ftc.gov
spugh@ftc.gov

NEW JERSEY
NEW YORK
PENNSYLVANIA
WASHINGTON D.C.
WISCONSIN

Re:

In re Advocate Health Care Network, et al., FTC Docket No. 9369

Dear Tom and Sean:

I write on behalf of all Respondents in the above matter to propose terms under which the
Respondents would agree to settle the claims in the Complaint and terminate the
proceedings now pending before the Commission and in the Northern District of Illinois.
The Complaint in this matter alleges that the proposed merger between Respondents
Advocate Heath Care Network (Advocate) and NorthShore University Health System
(NorthShore) will reduce competition for certain (i.e., excluding certain tertiary and
quaternary services) inpatient general acute care hospital services, and therefore result in
higher prices paid by commercial health plans for those services, within a market that
contains the four NorthShore hospitals and two Advocate hospitals, specifically Lutheran
General Hospital and Condell Medical Center.
As we have explained, Advocate is committed and the merged organization (ANHP)
will be committed to expanding risk-based payment-for-value arrangements with
Chicago-area health plans, and to offering an ANHP-based narrow network insurance
product (the High Performance Network or HPN) in which ANHP will accept
capitated rates (equivalent to lower rates than it receives in broader network health plans)
in exchange for the increased patient volume created by the narrowness of the network.
In turn, the HPN will be sold at lower premiums (as a result of lower provider costs). A
merger between Advocate and NorthShore, or more specifically, a transaction that fully
aligns Advocate and NorthShores finances and policies, including cost reductions and
pricing, is necessary for the creation of a commercially successful, two-system narrow
network product (the HPN).
The ANHP HPN is a new-to-market, lower priced, high-quality insurance product that
will not be sold in the Chicago group insurance market in the absence of this transaction.
On a net basis, the downward pricing pressure created by this product even with

Established 1849

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J. Thomas Greene, Esq.

Sean P. Pugh, Esq.
February 18, 2016
Page 2
relatively small enrollment will more than offset any hypothetical upward pricing
pressure resulting from the merger.
Continued delay of the introduction of the HPN into the group insurance market deprives
consumers of the benefits of the product itself, the competitive responses of health plans,
and the competitive responses of other provider systems and networks. To provide the
benefits of the ANHP merger to the Chicago-area market without further delay, the
parties propose the following terms of settlement:
1. For a period of seven (7) years, ANHP will limit the annual increase in payment
rates for all acute care inpatient services at all current ANHP hospitals in the sixcounty Chicago metropolitan area under each commercial fee-for-service health
plan contract, to the rate of increase in the CPI-U, subject to a floor of 1.0%.
a. Accordingly, this agreement would limit rate increases in both a broader
product market and a broader geographic market than that alleged by the
Commission in its Complaint.
b. Fee-for-service contracts would exclude contracts under which inpatient
hospital services are paid under capitation and those shared savings
contracts under which ANHP has actual down-side risk.
c. The CPI-U has historically lagged the rate of inflation in medical care
costs and is expected to do so for the foreseeable future.
2. For each year of the seven-year period ANHP, at its expense, will provide a
compliance report prepared by an independent auditor or consultant acceptable to
the FTC (and which in any event will not be ANHPs general auditor).
3. In the event ANHP were determined to have imposed a rate increase on any
health plan greater than that allowed under the agreement, ANHP would be
required to refund the overage to the affected plan(s) within 90 days.
4. ANHP will commit to make all required publicly-reported and ANHP internal
quality/safety data transparent and to produce a Value Report for the new
organization similar to the annual Advocate Physician Partners value report on an
annual basis starting the year after closing.
5. ANHP will consent to private enforcement of the settlement agreement terms by
its contracted health plans via binding arbitration with agreed-upon arbitration
procedures.

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J. Thomas Greene, Esq.

Sean P. Pugh, Esq.
February 18, 2016
Page 3
6. All costs of enforcing the agreement by the FTC and/or private parties would be
borne by ANHP.
We make this offer in a good faith effort to resolve the matter, and in the continued belief
that the mergers ability to bring the High Performance Network product into the group
market at the earliest possible time will stimulate competition and be of immense value to
consumers in the greater Chicago marketplace.
We look forward to discussing this proposal with you and appreciate your consideration.
Very truly yours,

Robert W. McCann
cc:

David E. Dahlquist, Esq.

J. Robert Robertson, Esq.