By Matthew Santoni

Law360 (June 8, 2020, 7:08 PM EDT) -- A Philadelphia-area group of nursing homes will have to answer a subpoena for records relating to whether it competes with the Albert Einstein Healthcare Network and Thomas Jefferson University Hospitals, after a federal judge ruled they were relevant to the Federal Trade Commission's opposition to the merger between Einstein and Jefferson.

Because the FTC lawsuit opposing the Einstein-Jefferson merger was based in part on how the merger would affect competition for inpatient acute care hospital services in Montgomery County, Northern Philadelphia and the Philadelphia area in general, the records Einstein sought from Shannondell Inc.'s facilities in Montgomery County were relevant to Einstein's efforts to rebut the government's claims, U.S. District Judge Gerald J. Pappert said Friday.

"The discovery requested from Shannondell is relevant to Einstein's defense concerning whether Shannondell, in fact, exists as a competitor for acute rehabilitation services in the proper relevant market," the judge wrote Friday. "Indeed, because Einstein contends that Shannondell's services compete with those of Einstein and Jefferson, the subpoena requests are relevant to evaluating both the product and geographic market."

The court denied Shannondell's motion to quash the subpoena for records on how and where it does its business, and gave the nursing home until June 26 to comply.

The FTC filed an administrative complaint in February opposing Jefferson Health's efforts to acquire the Einstein network because the proposed $599 million merger would allegedly reduce competition between the networks for participation in insurance networks, and would give the combined system control of 60% of the general acute care market in North Philadelphia and 45% of the market in Montgomery County.

Einstein subpoenaed information from Shannondell, which serves about 1,400 patients in a continuing care retirement community, a personal care home and a skilled nursing facility, seeking to prove that it had competition other than Jefferson in the region, which would remain even after the merger. The subpoena, which the FTC "piggybacked" on, sought Shannondell's records relating to things such as its competition with or transactions with Jefferson or Einstein, where its patients came from, the services it offered, other competition it had for rehabilitation services, and other data about patient demographics, health plan participation and reimbursements.

Shannondell fought the subpoena, arguing that it wasn't truly a competitor for acute care services, and that responding to the subpoena would expose confidential information and trade secrets at a time when all its personnel were tied up with fighting the spread of the COVID-19 pandemic within its facilities.

Judge Pappert said the records Einstein sought went to the question of whether Shannondell was a competitor. Shannondell's concerns about exposing company secrets could be covered by a protective order guarding such secrets from disclosure, the judge wrote.

"Einstein has demonstrated a compelling need for this information, as it cannot be acquired from any of the parties themselves. ... Even if Shannondell could establish a 'clearly defined and serious injury' by complying with the subpoenas, the relevance and need for the information weigh in favor of the subpoenaing parties," the court's order said. "And as for Shannondell's concerns about confidentiality and harm, the court's stipulated protective order serves as an adequate safeguard."

The court acknowledged that Shannondell remained under pressure because of the coronavirus pandemic, but noted that the deadline for responding to the Einstein subpoena had been extended from April 20 to May 15, then to June 15. Keeping up with the pandemic, the court said, was not a reason to duck the subpoena, but it bought Shannondell a couple of extra weeks to answer it.

"Due to staffing shortages from illness or caring for family members, the vice president of health services at Shannondell represents that the primary employee who oversees the medical records department is currently serving as a nurse's aide to meet the needs of residents," Judge Pappert wrote. "Therefore, rather than mandating immediate compliance with the subpoenas, the court requires that Shannondell comply with the production requests on or before Friday, June 26, 2020."

A representative of the FTC declined to comment Monday. Attorneys for Shannondell, Jefferson and Einstein did not immediately respond to requests for comment.

The FTC is represented in-house by Mark Seidman, Charles Dickinson and James Weingarten.

Pennsylvania is represented by its attorney general's office.

Einstein is represented by Stephen A. Loney Jr., Virginia A. Gibson, Garima Malhotra, Alexander B. Bowerman, Leigh L. Oliver, Justin W. Bernick, Robert F. Leibenluft, Kimberly D. Rancour and Kathleen K. Hughes of Hogan Lovells.

Jefferson is represented by Paul H. Saint-Antoine, Alison M. Agnew, Daniel J. Delaney, John L. Roach IV, John S. Yi, Kenneth M. Vorrasi and Jonathan H. Todt of Faegre Drinker Biddle & Reath LLP.

Shannondell is represented by Kimber L. Latsha and Brian A. McCall of Latsha Davis & Marshall PC.

The case is FTC v. Thomas Jefferson University et al., case number 2:20-cv-01113, in the U.S. District Court for the Eastern District of Pennsylvania.

--Additional reporting by Kevin Stawicki and Bryan Koenig. Editing by Adam LoBelia.

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