ProMedica Health Sys., Inc. v. Federal Trade Commission (Summary)

ANTITRUST – HOSPITAL MERGERS

ProMedica Health Sys., Inc. v. Federal Trade Commission, No. 12-3583 (6th Cir. Apr. 22, 2014)

The U.S. Court of Appeals for the Sixth Circuit upheld an order by the Federal Trade Commission (“FTC”) ordering a health system to divest a smaller hospital recently acquired through a merger, which had determined that the merger would adversely affect competition in violation of the Clayton Act.

Two hospital systems, ProMedica and St. Luke’s, agreed to merge in 2010, giving ProMedica a majority of the market share in both primary and secondary services and obstetrical services.  The FTC challenged the merger, and an Administrative Law Judge and the Commission held in subsequent hearings that the merger would lessen competition in an already highly concentrated market, that it would permit ProMedica to unilaterally raise prices above a procompetitive level, and that the merger did not create any efficiencies sufficient to offset the anticompetitive effects.  As such, the FTC ordered ProMedica’s divestment of St. Luke’s.  ProMedica sought judicial review of that order.

The court confirmed the Commission’s determination, finding the market concentration data assessment resulted in substantial evidence that the merger well exceeded the threshold to be considered a highly concentrated market, thereby triggering the presumption of illegality.  The Commission therefore had every reason to conclude as it did that such dominance offered the plaintiff too much leverage to increase its rates.  The court found that the Commission was correct in determining the competitive effects of the merger by clustering both primary and secondary general acute care services for consideration.  The remedy of divestiture, which the FTC had found to be the best means to preserve competition in the relevant market, was deemed not to be an abuse of discretion.