FTC Puts Conditions on UHS's Proposed Acquisition of Ascend Health Corporation

Hospital management company Universal Health Services, Inc. will sell an acute inpatient psychiatric facility in the El Paso, Texas/Santa Teresa, New Mexico area to settle Federal Trade Commission charges that UHS’s proposed acquisition of Ascend Health Corporation would be anticompetitive.  The settlement is the latest example of the FTC’s work to protect consumers from anticompetitive acquisitions and higher health care costs.

On June 3, 2012, UHS, headquartered in King of Prussia, Pennsylvania, agreed to acquire Ascend, headquartered in New York, New York, in a deal valued at approximately $517 million.  UHS owns or operates 25 general acute care hospitals and 198 behavioral health facilities in 36 states, Washington, DC, Puerto Rico, and the U.S. Virgin Islands.  It is one of the largest hospital management companies in the country, with 2011 revenues of $7.5 billion.

Ascend owns or operates nine behavioral health facilities in Arizona, Oregon, Texas, Utah, and Washington State, including seven acute inpatient psychiatric hospitals, a substance abuse residential treatment center, and an addiction treatment center. 

According to the FTC, the acute inpatient psychiatric facilities owned by both UHS and Ascend provide for the diagnosis, treatment, and care of patients deemed to be a threat to themselves or others, or who are unable to perform basic life functions due to an acute psychiatric condition.  Acute inpatient psychiatric care is a distinct relevant product market, as other levels of care are not substitutes for it.  The relevant geographic market for such facilities is local in nature, with most residents of El Paso and Santa Teresa receiving care from facilities located in the area.

The FTC’s complaint charges that UHS’s proposed acquisition of Ascend would be anticompetitive and would violate federal antitrust laws.  As proposed, the deal allegedly would lead to a virtual monopoly in the provision of acute inpatient psychiatric services to commercially insured patients in the El Paso/Santa Teresa area.  The complaint alleges that the deal would eliminate competition in the local market between UHS and Ascend, which has benefitted local consumers through lower health care costs, higher quality of care, and improved services.

The FTC contends that the proposed acquisition likely would cause anticompetitive harm by allowing UHS to raise the reimbursement rates it negotiates with commercial insurance plans for acute inpatient psychiatric services.  These higher costs ultimately would be borne by consumers, in the form of higher insurance premiums, co-pays, and other out-of-pocket costs.  Finally, the complaint alleges that the lost competition would reduce UHS’s incentive to provide better service and patient care.

To resolve these competitive concerns, the proposed order settling the FTC’s charges focuses on the El Paso/Santa Teresa area and requires UHS to sell its Peak Behavioral Health Services facility within six months to an FTC-approved buyer.  UHS will acquire UBH of El Paso, an Ascend facility, when the merger closes.

In addition, to ensure that the Peak assets are able to attract a buyer that can effectively compete with UHS after the sale, the proposed order allows the Commission to require a second UHS hospital, Mesilla Valley Hospital in Las Cruces, New Mexico, to be sold together with Peak if Peak alone is not divested to an approved buyer within six months.  UHS also is required to keep the Peak assets separate and apart from its other operations and to maintain both Peak and Mesilla Valley as viable operations pending a sale.

The Commission vote approving the complaint and proposed settlement order was 5-0.  The order will be subject to public comment for 30 days, until November 7, 2012, after which the Commission will decide whether to make it final.  Comments should be sent to:  FTC, Office of the Secretary, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Comments can be submitted electronically.

NOTE:  The Commission issues a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest.  The issuance of a complaint is not a finding or ruling that the respondent has violated the law.  A consent agreement is for settlement purposes only and does not constitute an admission of a law violation.  When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions.  Each violation of such an order may result in a civil penalty of $16,000.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action.  To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20580.  To learn more about the Bureau of Competition, read Competition Counts.  Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.