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FTC Granted First Preliminary Injunction in More than a Decade in Challenge to Ohio Hospital Combination
First published in Antitrust News & Notes, June 2011

By William R. Vigdor and Lisa R. Helem

The Northern District of Ohio recently granted the request of the Federal Trade Commission (FTC) for a preliminary injunction pending a full administrative trial relating to a Joinder Agreement between ProMedica Health System and St. Luke’s Hospital.1 The decision is notable in several respects: First, this is the FTC's first preliminary injunction against parties in a hospital merger in more than a decade. In concluding that the FTC satisfied its burden of demonstrating a likelihood of success on the merits, the district court found that the merger would reduce competition in the markets for general acute care hospital and obstetrics services in Lucas County, Ohio. The court concluded that the parties were the closest competitors in the market and, based in part on the parties acknowledgement, prices would have increased by double digits.2 Second, this is one of the rare merger decisions that addressed the failing and flailing firm defenses, although the court rejected both defenses.3 Third, while granting the FTC’s requested relief, the court’s order expressly allowed the parties to coordinate the provision of care and share information consistent with the Patient Protection and Affordable Care Act and as would otherwise be consistent with the antitrust laws.4 This aspect of the decision has important implications for gun-jumping.5 Fourth, the district court imposed a deadline under which the FTC was to complete its administrative hearing.6

On May 25, 2010, ProMedica and St. Luke’s entered into the Joinder Agreement.7 The transaction was not reportable under the HSR Act.8 On September 1, 2010, St. Luke’s became part of the ProMedica system.9 In July 2010, the FTC and Attorney General of Ohio opened an investigation into the transaction, and ProMedica and the government entered into a Hold Separate Agreement that limited the degree to which the parties could further integrate their business and operate as a single entity.10 On January 6, 2011, the FTC staff filed an administrative complaint alleging that the acquisition violated Section 7 of the Clayton Act, 15 U.S.C. §18. The next day, the FTC filed a complaint in the Northern District of Ohio under Section 13(b) of the Federal Trade Commission Act 15 U.S.C. §53(b) seeking a temporary restraining order and preliminary injunction preventing ProMedica from fully integrating its operations with St. Luke’s before completion of the FTC’s administrative proceeding.11

The court followed the analysis used in the FTC and Department of Justice (DOJ) Horizontal Merger Guidelines.12 The court concluded that the market was general acute care services and obstetrics in Lucas County. In that market, the court found that the acquisition would create a firm with about 80 percent of obstetrical services and nearly 60 percent of the general acute care market.13 Based on these shares and overall levels of concentration, the court concluded that the merger was presumptively unlawful.14

The court also concluded that St. Luke’s and ProMedica were each other’s closest competitors. Prior to the transaction, St. Luke’s was a relatively high-quality lowpriced provider, notwithstanding its low market share. In contrast, ProMedica charged higher prices. The evidence showed, according to the court, that the parties expected rate increases in the double digits15 and that quality competition would suffer if the transaction were completed. The court held there were barriers to entry and dismissed the parties’ efficiencies arguments. In addressing the failing firm defense, the court concluded that St. Luke’s was rebounding from its financial troubles and was not on the verge of going out of business.16

Under Section 13(b), the court balanced the anticompetitive harm and the equities. No court has denied relief to the FTC in a 13(b) proceeding in which the FTC has demonstrated a likelihood of success on the merits. “The equities will often weigh in favor of the FTC because ‘the public interest in effective enforcement of the antitrust laws’ was Congress’s specific ‘public equity consideration’ in enacting Section 13(b).” CCC Holdings, 605 F. Supp. 2d at 36 (citing Heinz, 246 F.3d at 726).17

The court granted the FTC’s preliminary injunction, but required the FTC to complete its work in short order.

The Court envisions a relatively short stay of the completion of the relationship between Plaintiffs and SLH, pursuant to the HSA of August 2010. Toward that end, if the FTC has not completed actions before it by November 30, 2011, this Court will entertain taking additional steps to insure that all parties are treated fairly and expeditiously.18

ProMedica — noting that deal had “gone through a rigorous due diligence process” — expressed its disappointment with the FTC’s complaint. “The joinder has enabled St. Luke’s, an organization that was in financial distress, to continue to fulfill its mission of providing care for the community,” ProMedica stated in a press release. The transaction creates benefits including: “increasing patients’ access to care, enhancing clinical integration, and creating efficiencies in delivering care,” according to ProMedica.19

In contrast, the FTC applauded the decision. “In a time of rapidly escalating health care costs, we believe that consumers in Lucas County, Ohio, are the true beneficiaries of this decision,” said FTC Bureau of Competition Director Richard Feinstein.20 The FTC evidentiary hearing on its administrative complaint was scheduled for May 31. After an FTC administrative law judge considers the merits of the acquisition, the FTC will then determine the legality of the acquisition under Section 7 of the Clayton Act.

The St. Luke’s case is not the only recent FTC challenge to an acquisition in the context of health care reform. The FTC also recently filed an administrative complaint challenging Phoebe Putney Health System’s proposed $195 million acquisition of rival Palmyra Park Hospital from HCA, Inc., in Albany, Georgia.21 The FTC’s complaint, filed April 19, alleges that the transaction would eliminate competition between Phoebe Putney and Palmyra. The FTC also alleged that the transaction would create a virtual monopoly for inpatient general acute care services sold to commercial health plans and their customers in Albany, Georgia.22

On April 20, the FTC, along with the Attorney General of the State of Georgia, also filed a sealed complaint in the Middle District of Georgia and motions for a temporary restraining order and temporary injunction. On April 21, the court approved the TRO, enjoining the defendants from taking any additional steps towards consummating the transaction.23 An evidentiary hearing before an FTC administrative law judge is scheduled for September 19, 2011.24

These merger challenges arise after the FTC and DOJ have lost many challenges to hospital merger cases. They also come at a time when the Obama administration is encouraging more collaboration among health care providers. Simultaneously, the FTC and DOJ have been trying to persuade the health care community that they will not be overly aggressive toward such collaborations. Whether these merger challenges will continue in frequency or in breadth, only time will tell.

For more information about emerging antitrust enforcement trends in hospitals and health care, please contact V&E partners William R. Vigdor, Dionne C. Lomax, James A. Reeder, or Jason M. Powers. Visit our website to learn more about V&E’s Antitrust practice.

1 FTC v. ProMedica Health System, Inc., Case No. 3:11 CV 47, slip op. (N.D. Ohio, Mar. 29, 2011), available at www.ftc.gov/os/caselist/1010167/110329promedicafindings.pdf (last visited May 25, 2011). ProMedica describes the transaction as a “joinder agreement.” That agreement combines many of the operations and pricing of ProMedica and St. Luke’s. The FTC uses both “joinder agreement” and “acquisition” to describe the transaction. For ease of reference, this article refers to the joinder agreement as a merger or acquisition.
2 ProMedica, slip op. at 110.
3 Id. at 79-93.
4 Pub. Law 111-148, 124 Stat. 119 Mar. 23, 2010; ProMedica, slip op. at 93.
5 The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (HSR Act), 15 U.S.C. § 18a, requires parties to mergers of certain sizes to submit a filing to the FTC and Department of Justice and observe a waiting period. Failing to observe that waiting period is known as gun-jumping. Premerger coordination by competitors often raises gun-jumping issues. The court’s approving the coordination of the delivery of services pending the FTC’s administrative hearing should provide guidance in this area of the law.
6 ProMedica, slip op. at 115.
7 Id. at 2.
8 Id. at 8.
9 Id. at 2.
10 Id. at 2-3. The preliminary injunction granted by the court kept in place the Hold Separate Agreement until the termination of the FTC proceedings.
11 The FTC voted 5-0 to approve both its administrative and federal district court complaints. Press Release, FTC and Ohio Attorney General Challenge ProMedica’s Acquisition of St. Luke’s Hospital (Jan. 6, 2011),
www.ftc.gov/opa/2011/01/promedica.shtm.
12 Fed. Trade Comm’n and Dep’t of Justice, Horizontal Merger Guidelines (Aug. 19, 2010), available at
www.ftc.gov/os/2010/08/100819hmg.pdf.
13 ProMedica, slip op. at 22.
14 Id. at 23.
15 Id. at 110. (“No court has ever denied relief in a 13(b) proceeding despite an acknowledgment by the defendant that prices will increase by double-digits.”)
16 Id. at 79-81.
17 Id. at 113.
18 Id. at 115.
19 Press Release, FTC Files Administrative Complaint (Jan. 6, 2011),
www.promedica.org/default.aspx?PageID=1587.
20 Press Release, Statement by FTC Bureau of Competition Director Richard Feinstein on the Court Ruling Granting a Preliminary Injunction in the ProMedica/St. Luke’s Hospital Matter (March 29, 2011),
www.ftc.gov/opa/2011/03/promedica.shtm.
21 In the Matter of Phoebe Putney Health System, Inc., et al Federal Trade Commission, Docket No. 9348 (April 19, 2011).
22 The FTC alleges that in the general acute care market in the six counties surrounding Albany, Ga., Phoebe Putney’s post – transaction market share will jump to 86 percent. Complaint, In the Matter of Phoebe Putney Health System, Inc., et al Federal Trade Commission, Docket No. 9348 (April 19, 2011), available at
www.ftc.gov/os/adjpro/d9348/110420 phoebecmpt.pdf. The FTC also alleges that Phoebe structured the deal in a way that uses the Hospital Authority of Albany-Dougherty to protect the transaction from antitrust scrutiny under the “state action doctrine.” Id.
23 The Northern District stated it further detailed its reasons for granting the TRO in a sealed April 20, 2011, order. Order Granting TRO, Federal Trade Commission and the State of Georgia v. Phoebe Putney Health System, Inc., No. 1:11-cv-58-WLS (M.D. Georgia April 21, 2011).
24 Press Release, FTC and Georgia Attorney General Challenge Phoebe Putney Health System’s Proposed Acquisition of Palmyra Park Hospital as Anticompetitive. (April 20, 2011),
www.ftc.gov/opa/2011/04/phoebeputney.shtm.


This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.

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