This past week, the U.S. Court of Appeals for the 6th Circuit issued a major decision in the hospital sector, when it supported the Federal Trade Commission (FTC) and ordered the Toledo, Ohio based ProMedica to stop its acquisition of St. Luke’s Hospital in Maumee, Ohio.
Although ProMedica and St. Luke’s completed their merger in September 2010, the FTC challenged the deal by arguing that it would reduce competition and allow ProMedica to increase prices. A judge upheld the FTC’s decision, which gave ProMedica six months to divest St. Luke’s to an FTC-approved buyer. ProMedica appealed to the 6th Circuit. St. Luke’s credit rating was downgraded during this time, due to “large operating losses.”
In recent years, the FTC has become increasingly involved in, and winning, hospital merger challenges. It looks as though local strategic mergers will have difficulty when trying to gain approval (especially in smaller communities where they substantially raise market power). In the future, experts predict that hospital mergers may continue to face pressure by the FTC.
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