The Federal Trade Commission staff has concluded that the formation of a purchasing joint venture between Elmore Community Hospital and Community Hospital, both of which are rural hospitals in Elmore County, Alabama, would not appear to violate antitrust laws. The joint venture is being formed primarily to purchase personnel and various other services on behalf of the two hospitals, in order to help them reduce costs by allowing them to take advantage of volume discounts, lower transaction costs, and share personnel that neither hospital can employ on a full-time basis.
Elmore is a 69-bed hospital in Wetumpka, and Community is a 77-bed hospital in Tallassee.
In a letter signed by Mark J. Horoschak, Assistant Director for Health Care of the FTC's Bureau of Competition, the FTC staff said the purchasing joint venture appears to fall within one of the "safety zones" of conduct in the health-care industry that the FTC and the Department of Justice have said they generally will not challenge under the antitrust laws. (Seven health-care related safety zones are included in the agencies' Health Care and Antitrust Enforce- ment Policy Statements, which were updated and expanded in September 1994.) Included in the applicable safety zone are joint purchasing arrangements where the purchases account for less than 35 percent of the total market for the purchased items and, for arrangements that include direct competitors, where the cost of the jointly-purchased items accounts for less than 20 percent of the total revenues of each purchaser.
As described to the FTC staff, the Elmore/Community arrangement will not involve joint provision of hospital services to the public. In addition, Elmore and Community anticipate that purchases through the joint venture will fall within the safety zone requirements. Thus, the venture would not appear likely to have any anticompetitive effects, the FTC staff concluded, adding that it may help the hospitals achieve substantial efficiencies.
NOTE: This letter sets out the views of the staff of the FTC's Bureau of Competition, as authorized by the Commission's Rules of Practice. It has not been reviewed or approved by the Commission. As the Commission's rules explain, the staff's advice is rendered "without prejudice to the right of the Commission later to rescind the advice and, where appropriate, to commence an enforcement proceeding." Staff advice concerning issues covered by the Federal Trade Commission/Department of Justice Health Care Policy Statements will be given within 90 to 120 days (depending on the topic) after all necessary information is provided.
Copies of the staff letter and the original inquiry, as well as the DOJ/FTC Statements of Antitrust Enforcement Policy in the Health Care Area, are available from the FTC's Public Reference Branch, Room 130, 6th and Pennsylvania Avenue, N.W., Washington, D.C. 20580. FTC news releases and other materials also are avail- able on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov