Source: https://www.skadden.com/insights/publications/2014/04/the-potential-impact-of-ipromedicai-health-care-an
Timestamp: 2019-04-26 10:44:50+00:00

Document:
On April 22, 2014, the United States Court of Appeals for the Sixth Circuit handed the Federal Trade Commission (FTC or Commission) another significant victory in a hospital merger,1 ruling that the FTC’s decision and order requiring that ProMedica divest St. Luke’s, another Lucas County, Ohio-based hospital, was comprehensive, carefully reasoned and supported by substantial evidence.2 This important victory for the FTC in the health care industry underscores the fact that merging parties in all industries will face vigorous enforcement under Section 7, especially when market shares are high, documents are problematic and significant pro-competitive efficiencies are not cited by the parties. The decision, along with several other notable recent FTC successes in enforcement actions, can be expected to further embolden an already aggressive antitrust enforcer.
Clearly an important victory in the FTC’s health care enforcement agenda, the Sixth Circuit’s ruling has broader implications. In particular, it signals a continued heavy reliance by the courts on the Merger Guidelines and builds on other, recent court opinions involving government merger challenges. In addition, the Sixth Circuit’s quick dismissal of the “weakened competitor” defense and the parties’ arguments regarding efficiencies could also have implications for future merger matters. Importantly, it continues the U.S. antitrust agencies’ recent winning streak, something merging parties must continue to take into consideration.
1 See, e.g., F.T.C. v. Phoebe Putney Health System Inc., 133 S. Ct. 1003 (2013), F.T.C. v. St. Luke’s Health Sys., Ltd., 1:12-CV-00560-BLW, 2014 WL 272339 (D. Idaho Jan. 24, 2014).
2 ProMedica Health Sys., Inc. v. F.T.C., 12-3583, 2014 WL 1584835 (6th Cir. Apr. 22, 2014). The Sixth Circuit heard the case on appeal from an administrative decision affirmed by the Commission.
3 Indeed, the Merger Guidelines themselves state that they are just that — guidelines, which “may also assist the courts in developing an appropriate framework for interpreting and applying the antitrust laws in the horizontal merger context.” Merger Guidelines § 1.
4 833 F. Supp. 2d 36 (D.D.C. 2011).
5 See, e.g., U.S. v. Bazaarvoice, Inc., 13-CV-00133-WHO, 2014 WL 203966 (N.D. Cal. Jan. 8, 2014).
6 ProMedica Health Sys., Inc. at 18.
7 Id. at 7 – 12. The parties agreed that the relevant geographic market was Lucas County, Ohio.
8 186 F.3d 1045 (8th Cir. 1999).
9 Primary services include basic care, such as hernia surgeries and radiology services. ProMedica Health Sys., Inc. at 2 – 3. Secondary services, such as hip replacements and bariatric surgery, require more specialization. Id. at 3. Tertiary services, such as brain surgery and treatment for severe burns, require even more specialization. Id. Quaternary services, such as major organ transplants, require the highest level of specialization. Id.
10 Paradoxically, the “clustering” theory is not recognized under the demand-side approach of the Merger Guidelines. So in this limited sense, the Sixth Circuit seems to have chosen to deviate from the Merger Guidelines.
13 Id. at 12. Post-merger, ProMedica’s share of the primary services (excluding OB) and secondary services market would be over 50 percent and its share of the OB market would be over 80 percent.
15 U.S. v. General Dynamics Corp., 415 U.S. 486 (1974).
16 ProMedica Health Sys., Inc. at 18.

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