ProMed­ica or­dered to undo Ohio deal

Modern Healthcare - - NEWS - By Joe Carl­son

Last week’s federal ap­pel­late rul­ing that ProMed­ica must un­wind its 2010 ac­qui­si­tion of a sub­ur­ban Ohio hospi­tal is a set­back for hos­pi­tals that ar­gue they need to merge be­cause they are fi­nan­cially weak­ened, le­gal ex­perts say.

A three-judge panel of the 6th U.S. Cir­cuit Court of Ap­peals in Cincin­nati held that the Federal

Trade Com­mis­sion cor­rectly de­cided that Toledo-based not­for-profit ProMed­ica was likely to in­crease prices af­ter buy­ing sub­ur­ban St. Luke’s Hospi­tal in Maumee. The court re­jected the so-called “weak­ened-firm” de­fense of the deal. Un­der that the­ory, a deal should be al­lowed to stand if it’s the only way to keep a fi­nan­cially strug­gling hospi­tal afloat,

even if it might other­wise vi­o­late an­titrust laws.

But ev­i­dence pre­sented in the case showed that St. Luke’s had enough cash re­serves be­fore the deal to pay its oblig- ations and that its mar­ket share was on the rise, ac­cord­ing to Judge Ray­mond Keth­ledge, who wrote the opin­ion. He called ProMed­ica’s and St. Luke’s

weak­ened-firm ar­gu­ment “the Hail-Mary pass of pre­sump­tively doomed merg­ers—in this case thrown from ProMed­ica’s own end zone.”

In a writ­ten state­ment, ProMed­ica said it was “ex­tremely dis­ap­pointed” by the de­ci­sion and in­tends to ap­peal. It could ask for a hear­ing be­fore the full 6th Cir­cuit or ap­peal to the U.S. Supreme Court. Dou­glas

Ross, an an­titrust lawyer with Davis Wright Tre­maine in Seat­tle, said the rul­ing in­di­cates that “un­less a hospi­tal is about to go out of busi­ness, the merger rules don’t change, and (the hospi­tal) should think about cut­ting ser­vices first be­fore look­ing for a merger that would get an­titrust at­ten­tion.” The FTC vic­tory is likely to force hos- pitals to think more care­fully about the an­titrust im­pli­ca­tions of their merger and ac­qui­si­tion moves. “Hos­pi­tals that get to the stage of the FTC rat­tling their cage are go­ing to have to take that very se­ri­ously, be­cause the FTC’s track record is very good,” said Matthew Can­tor, an an­titrust part­ner with

Con­stan­tine Can­non in New York.

Ear­lier this year, the FTC won a federal district court case in Boise, Idaho, in which it chal­lenged the ac­qui­si­tion of a large mul­ti­spe­cialty physi­cian prac­tice by the state’s largest health­care provider, St. Luke’s Health Sys­tem. Last year, the FTC won a case be­fore the

Supreme Court ques­tion­ing the right of a pub­lic-hospi­tal author­ity in Ge­or­gia to buy its only com­peti­tor in a six-county area. Those court wins fol­low a string of hospi­tal merg­ers that were called off in the past few years af­ter the FTC threat­ened lit­i­ga­tion.

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