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Open Season on Hospitals at the Federal Trade Commission

The Federal Trade Commission has finally started cracking down on hospital mergers, and not a moment too soon. The WSJ reports that a panel of three judges in a Cincinnati appeals court sided against an Ohio hospital yesterday. Toledo hospital system ProMedica tried to merge with a local community hospital in 2010, but the FTC quickly stepped in:

The Federal Trade Commission moved to block the merger under an antitrust statute, claiming the deal would allow ProMedica to jack up prices for in-patient services. The health system countered that it was doing the Toledo metropolitan area a service by rescuing a struggling hospital from insolvency.

“[T]he Commission had every reason to conclude that, as ProMedica’s dominance in the relevant markets increases … so too does ProMedica’s leverage in demanding higher rates,” said the Sixth Circuit ruling.

ProMedica has vowed to continue the fight in higher courts, but this ruling still marks an important victory for the FTC and for health care consumers. Consolidation invariably increases the market power of hospital chains and puts insurance companies at a disadvantage when negotiating prices for their customers. The FTC has been reluctant to apply antitrust legislation to hospitals in the past, partly because the public holds hospitals in high esteem. As a result, hospitals grew and grew and their patients paid more and more. If the FTC has grown more diligent in protecting consumer interests in the health care marketplace, that is good news indeed.

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  • Bob Patterson

    This is a pretty short article which appears to be one sided in favor of
    anti-merger without all of the facts presented. While I hold that there is one
    possibility that the merger could be an anti-trust violation thus seeing a
    causality increase in the price of service-if the local hospital was truly
    going under then the failure of that facility would also fail the community it

    There are two other possible areas of consideration rather than a blanket
    policy that the courts were automatically right in their decision. First take the
    example of LA’s hospitals and the failure of a major hospital in the heart of
    the city (multiple years ago-too many to count). This failure led to the
    closure of a level 1 trauma center. Should a merger have taken place with this
    facility? According to this article the answer is a resounding NO because the “tone”
    of the article would lend you to believe that there would automatically be a
    price increase thus the community would be harmed. With the closure of a level
    1 trauma center the community they served is definitely suffering.

    The second area that I wanted to pose was the old Certificate of Need program
    (still active-to some extent in some states). A Certificate of Need (CON), in
    the United States, is a legal document required in many states and some federal
    jurisdictions before proposed acquisitions, expansions, or creations of
    facilities are allowed. CONs are issued by a federal or state regulatory agency
    with authority over an area to affirm that the plan is required to fulfill the
    needs of a community. There is a great deal of work involved to justify that a
    CON should be awarded to include testifying before a legislative body to prove
    that the proposed action will be good for the community. Lately the CON has
    greatly diminished throughout the country because of the powerful hospital,
    nursing homes, etc. lobbies. If Ohio required a CON then they (ProMedica)
    either had proven that a need existed or it didn’t-thus there wouldn’t have
    been a need of the expense of the litigation. If a need existed then they could
    legally go forward with the acquisition. If they did not prove that a need
    existed then that would be the end of the story. As a side note-the company
    doing the acquisition is the one responsible for proving that a need exist-they
    have to do all of the paper work and pay for the study. Maybe-just maybe we
    need to look at bringing back the Certificate of Need program which doesn’t
    come out of tax payer’s dollars but rather from the fees collected from the CON
    program. It is totally self-sufficient. I worked in a CON program and saw firsthand
    how much good it can do for a community.

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