Week 3: Case Study

HCA642 Healthcare Policy, Law, and Ethics

Issue
The Federal Trade Commission (FTC) and the State of Missouri are seeking a preliminary injunction under section 13(b) of the Federal Trade Commission Act (FTC Act), 15 U.S.C. Section 53(b), which “authorizes the Commission to seek preliminary and permanent injunctions to remedy any provision of law enforced by the Federal Trade Commission. Under the first proviso of Section 13(b), whenever the Commission has ‘reason to believe’ that any party ‘is violating, or is about to violate’ a provision of law enforced by the Commission, the Commission may ask the district court to enjoin the allegedly unlawful conduct, pending completion of an FTC administrative proceeding to determine whether the conduct is unlawful. Further, under the second proviso of Section 13(b), ‘in proper cases’, the Commission may seek, and the court may grant, a permanent injunction” (www.ftc.gov). This particular injunction is meant to refrain the enjoining of the merger of two commercial hospitals in Poplar Bluff, Missouri. Lucy Lee Hospital wishes to purchase Doctors Regional Medical Center (DRMC). In this case, the plaintiffs, FTC and State of Missouri, argue that the proposed merger would considerably lessen the competition between other acute care hospitals in the Poplar Bluff area (https://scholar.google.com/scholar_case). The question stands: is the proposed merger between Lucy Lee Hospital and DRMC a violation of the Clayton Anti-Trust Act, 15 U.S.C. Section 18. In addition, is the merger in violation of the Missouri Anti-Trust law, Mo.Rev.Stat. Section 416.031.
Rule
The statutes that the proposed merger is in question of violating include:
Mo.Rev.Stat. Section 416.031: 1. Every contract, combination or conspiracy in restraint of trade or commerce in this state is unlawful. 2. It is unlawful to monopolize, attempt to monopolize, or conspire to monopolize trade or commerce in this state. 3. It is unlawful for any person* engaged in trade or commerce in this state, in the course of such trade or commerce, to lease or make a sale or contract for sale of any commodity, whether patented or unpatented, for use, consumption, or resale within this state, or fix a price charged therefor, or discount from, or rebate upon, such price, on the condition, agreement, or understanding that the lessee or purchaser thereof shall not use or deal in the commodities of a competitor or competitors of the lessor or seller, where the effect of such lease, sale, or contract for such sale or such condition, agreement, or understanding may be to substantially lessen competition or tend to create a monopoly in any line of trade or commerce in this state (http://law.justia.com/).
Clayton Antitrust Act 15 U.S.C. Section 18: This statute attempts to prohibit certain actions that lead to anti-competitiveness. In other words, mergers and acquisitions where the effect may substantially lessen competition or where the voting securities and assets threshold is met are unlawful (Kitner, 1).
Analysis
After market analysis, the plaintiffs proved that the “merger of Lucy Lee and DRMC is unlawful because the merged entity would acquire 84% of the relevant market. The post-merger HHI would be at least 6,000 and could exceed 7,000. The HHI after the merger would increase at least 2,700 points and could exceed 3,200 points. The post-merger market concentration would far exceed the threshold for a highly concentrated market contained in the Merger Guidelines. The defendants did not dispute these data, but argue that the concentration level is greatly overstated because plaintiffs have improperly defined the relevant market. Because the Court has found plaintiffs' proposed market to be proper, however, defendants' argument fails” (http://www.leagle.com/).
In addition, the anticompetitive effects of the proposed merger are confirmed further analysis which shows that Lucy Lee and DRMC are each other's primary competitor within the market. By merging and eliminating this direct competition, the outcome will gain significant market power. This means that smaller hospitals within the area would not be able to compare with the services and would gain a very small market share.
Conclusion
The Court found that the merger was likely to have anti-competitive effects because the intense competition between Lucy Lee and DRMC. Competition within the area is important because it promotes improved hospital quality and service. Under section 13b of the Federal Trade Act, the court is required to balance the equities. Therefore, after review of the case, the plaintiff was granted preliminary injunction of the proposed merger.
Anti-Trust Violation or Not I personally think that this was a case of an Anti-Trust violation. Working in healthcare, I have seen mergers and acquisitions occur that have in result, depleted the smaller hospitals. This was because of the marketing power that resulted in the merger. The combined hospitals built new care centers and targeted additional markets in order to gain more patients and increase profits. This directly impacted the competition and in a sense, eliminated them. This does seem very fair to the smaller hospitals that did not have the marketing power of the larger merger. So yes, I would say that the merger of Lucy Lee Hospital and DRMC was a violation of the Anti-Trust Law.

References
- Harris, D. (2014). Contemporary Issues in Healthcare Law & Ethics. Chicago, IL: Healthcare Administration Press.
- Google Scholar. FTC v. Tenet Health Care Corp., 186 F. 3d 1045 - Court of Appeals, 8th Circuit 1999. Retrieved from: https://scholar.google.com/scholar_case?case=8297620010598613195&hl=en&as_sdt=6&as_vis=1&oi=scholarr.
- Google Scholar. FTC v. Tenet Healthcare Corp., 17 F. Supp. 2d 937 - Dist. Court, ED Missouri 1998. Retrieved from: https://scholar.google.com/scholar_case?case=5674448425018227728&hl=en&as_sdt=6&as_vis=1&oi=scholarr.
- Federal Trade Commission. A Brief Overview of the Federal Trade Commission's Investigative and Law Enforcement Authority. Retrieved from: https://www.ftc.gov/about-ftc/what-we-do/enforcement-authority.
- Kim, E. Introduction to IRAC. Video retrieved from: https://www.youtube.com/watch?v=fZK38vru_GM.
- MO Rev Stat § 416.031. Retrieved from: http://law.justia.com/codes/missouri/2011/titlexxvi/chapter416/section416031.
- Kintner; Joelson (1974). An International Antitrust Primer. New York: Macmillan.