• FTC v. ProMedica Health System, Inc.
  • July 14, 2011 | Authors: Justin Gundlach; Arthur N. Lerner
  • Law Firm: Crowell & Moring LLP - Washington Office
  • The FTC challenged acquisition of St. Luke's Hospital by ProMedica Health System on the grounds that it would hurt competition in the Lucas County, Ohio markets for inpatient obstetric and general acute-care inpatient hospital services. The court found that the existing level of concentration in the Lucas County market made the proposed acquisition presumptively illegal, and determined that ProMedica's various arguments failed to rebut that presumption.   Though their corporate affiliation had already occurred, the court granted a preliminary injunction, requiring the parties to continue abiding by the existing Hold Separate Agreement for the duration of the FTC's administrative proceedings.

    The court observed that ProMedica is Lucas County's "dominant" health system, and further that by eliminating the competition from St. Luke's the acquisition would make ProMedica a "must have" system for commercial medical payers. That is, ProMedica would enjoy a near-monopolistic bargaining position in the relevant markets.

    ProMedica sought to counter this characterization by arguing (1) that the acquisition would generate efficiencies, reducing prices to consumers; (2) that the acquisition would improve the ability of ProMedica and of St. Luke's to take productive advantage of federal health reform's support for Accountable Care Organizations; and (3) that St. Luke's was a failing enterprise whose resources would only remain productive if the acquisition prevented the impending failure.

    The court rejected each of these arguments. According to the court, (1) all of ProMedica's purported efficiencies were speculative at best; (2) St. Luke's was already well positioned to take advantage of opportunities created by the Patient Protection and Affordable Care Act (PPACA); and (3) contrary to ProMedica's assertions, St. Luke's was neither flailing nor failing, as evidenced by improvements to volume, occupancy, and financials that followed from a recent leadership change. Finally, the court also noted that, however much new entry or incumbent expansions might mitigate the acquisition's anticompetitive effects, that mitigation will not be timely, likely, or sufficient.

    The case will now proceed before an FTC administrative law judge, whose ruling may be appealed to the Commission itself.