FTC Wins Appeal, ProMedica Must Divest St. Luke's

The 6th U.S. Circuit Court of Appeals has ruled in favor of the Federal Trade Commission and ordered Toledo, Ohio-based ProMedica to divest Maumee, Ohio-based St. Luke's Hospital on the basis of competition violations.

ProMedica and St. Luke's merged in August 2010. After the merger, ProMedica became Lucas County, Ohio's dominant hospital provider controlling more than 50 percent of the market for primary and secondary services and more than 80 percent of the market for obstetrical services, according to the opinion.

Five months after the ProMedica and St. Luke's merger, the FTC challenged it. Subsequently, an administrative law judge and later the FTC concluded the merger would adversely affect competition in Lucas County. As a result, the FTC ordered ProMedica to divest St. Luke's, as it concluded divestiture would be the best means to preserve competition.

ProMedica appealed the FTC's order arguing the FTC's analysis of the merger's competitive effects was incorrect.

After review, the appeals court held the merger would likely cause ProMedica to raise its prices. "In this market, the higher a provider's market share, the higher its prices," read the opinion.   

Regarding ProMedica controlling a vast amount of the relevant market after the merger, the court held the "merger would enhance ProMedica's market power even more, to levels rarely tolerated in antitrust law," and agreed with the FTC's conclusions concerning the negative effects on competition in the area. 

ProMedica also argued the FTC incorrectly chose divesture as a remedy, and that a "conduct remedy" — which would establish separate negotiation terms for ProMedica and St. Luke's — was appropriate.

The appeals court held once a merger is found illegal, "an undoing of the acquisition is a natural remedy," and upheld the FTC's decision in choosing divesture as the remedy in the case.

After the court's ruling, ProMedica released a statement saying "We are extremely disappointed by today's decision and intend to appeal. We are comitted to exhausting all of our legal options. As we continue this legal journey, we would like to emphasize that St. Luke’s Hospital remains a member of ProMedica."

More Articles on Hospital Mergers:

6 Recent Hospital Transactions and Partnerships
Beacon Health System, South Bend Clinic Merger Called Off
Hospital Transaction Outlook for 2014: 6 Things to Watch

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