Legal Library: Cases and Proceedings

The FTC challenged ProMedica Health System, Inc.’s consummated acquisition of rival St. Luke’s Hospital in Lucas County, Ohio. The FTC’s administrative complaint alleged that the deal will reduce competition and allow ProMedica to raise prices for general acute-care and inpatient obstetrical services. The FTC staff also filed a separate complaint in federal district court seeking an order requiring ProMedica to preserve St. Luke’s as a separate, independent competitor during the FTC’s administrative proceeding. The action in federal district court was brought jointly with the Attorney General of the State of Ohio. The PI hearing was held on February 10 and 11, 2011. The District Court granted the FTC's request for a preliminary injunction. With an Initial Decision issued on 1/05/2012, the Chief Administrative Law Judge D. Michael Chappell ruled that ProMedica Health System, Inc.'s consummated acquisition of rival St. Luke's Hospital harmed competition in violation of U.S. antitrust law and would allow ProMedica to raise the prices of general acute care inpatient hospital services in Lucas County, Ohio (the Toledo area). Judge Chappell ordered ProMedica to divest St. Luke's Hospital to an FTC-approved buyer within 180 days after the order becomes final. On 3/28/2012, The FTC issued its Opinion and Final Order in a 4-0 decision, ordering ProMedica to divest St. Luke's Hospital to an FTC-approved buyer within six months after the Commission order becomes final. ProMedica appealed to the Sixth Circuit, which upheld the Commission's order.

DaVita, Inc. agreed to divest its ownership interest in seven dialysis clinics – five in suburban and urban areas of New Jersey and two on the outskirts of Dallas, Texas – to proceed with its $358 million acquisition of competitor Renal Ventures Management, LLC. DaVita is the second-largest  provider of outpatient dialysis services in the United States and Renal Ventures is the seventh-largest. DaVita will divest the seven clinics to PDA-GMF Holdco, LLC, a joint venture between Physicians Dialysis and GMF Capital LLC. Physicians Dialysis has been in business since 1990 and currently operates several outpatient dialysis clinics. According to the FTC's complaint, the acquisition would lead to significant anticompetitive effects in the New Jersey markets of Brick, Clifton, Somerville, Succasunna, and Trenton, and in the Dallas-area markets of Denton and Frisco. Currently, DaVita and Renal Ventures clinics compete directly with each other in these markets, and the merger would represent either a merger to monopoly or a reduction of competitors from three to two. Without that competition, the likely result would be reduced quality and higher prices for dialysis patients. Under the terms of the proposed settlement, DaVita, Inc. must obtain agreements from the medical director of each divested clinic to continue providing physician services after it transfers ownership to PDA-GMF Holdco; obtain consent from the relevant landlords to transfer leases for the facilities to the buyer; and provide the buyer an opportunity to interview and hire employees from the divested clinics. Also under the proposed settlement, DaVita is barred from contracting with the medical directors of the seven clinics for three years, and it must provide transition services for up to 24 months.

The FTC, together with the Idaho Attorney General, filed a complaint in federal district court seeking to block St. Luke’s Health System, Ltd.’s acquisition of Idaho's largest independent, multi-specialty physician practice group, Saltzer Medical Group P.A. According to the joint complaint, the combination of St. Luke’s and Saltzer would give it the market power to demand higher rates for health care services provided by primary care physicians (PCPs) in Nampa, Idaho and surrounding areas, ultimately leading to higher costs for health care consumers.   The federal district court held that the acquisition violated Section 7 of the Clayton Act and the Idaho Competition Act, and ordered St. Luke’s to fully divest itself of Saltzer’s physicians and assets.  The Ninth Circuit affirmed the district court ruling.