In a unanimous opinion on April 22, 2014, a three-judge panel of the Sixth Circuit Court of Appeals in Cincinnati ordered ProMedica Health System, Inc. (“ProMedica”) to unwind its merger with rival St. Luke’s Hospital (“St. Luke”) in Lucas County, Ohio.
In 2010, ProMedica, a nonprofit healthcare system based in Toledo, entered into a merger agreement with St. Luke’s, a community hospital located in Lucas County. In 2011, the Federal Trade Commission (“FTC”) ordered ProMedica to divest St. Luke’s, citing antitrust laws and finding that the merger of the two hospitals would impede competition and create an unfair advantage in the market. ProMedica subsequently filed a petition to overturn the FTC’s ruling.
The Sixth Circuit upheld the FTC’s ruling. Given that it controlled 46.8 percent of the healthcare market in Lucas County prior to the merger, ProMedica was already the “dominant” healthcare player in Lucas County, according to the Court. Adding St. Luke’s – which controlled approximately 11.5 percent of the county’s healthcare market prior to the merger – would lead to a tremendous increase in concentration in a market that already was highly concentrated. The merger, according to the Court, would provide ProMedica with undue leverage to control reimbursement rates with health insurers, leading to higher prices for patients.
The Sixth Circuit’s ruling signals a difficult challenge for hospitals that are more aggressively seeking mergers to establish economies of scale and boost their bargaining power with insurers.