FTC v. Advocate Health Care — June 2016 (Summary)

HOSPITAL MERGER

FTC v. Advocate Health Care
No. 15 C 11473 (N.D. Ill. June 20, 2016)

The United States District Court for the Northern District of Illinois denied the Federal Trade Commission’s (FTC) motion for preliminary injunction to enjoin the hospital defendants from consummating their proposed merger pending the completion of the FTC’s administrative trial in the merits of the plaintiff’s antitrust claim.  The federal district court ruled that the FTC did not demonstrate that they have a likelihood of succeeding on the merits in a Clayton Act claim against the hospital merger and denied the injunction.

The FTC sought to enjoin hospitals from consummating a proposed merger. In order for the court to grant a preliminary injunction, the FTC had to show that they would likely be successful in a Clayton Act claim against the hospitals. The Clayton Act prohibits a merger “in any line of commerce or in any activity affecting commerce in nay section of the country, the effect of [which] may be substantially to lessen competition, or tend to create a monopoly.”

In order to show that the FTC would likely win their Clayton Act claim, they had to determine both the relevant product market, and the geographic market of that product. All parties agreed that the relevant product in this case was inpatient general acute care services sold to commercial payers and their insured members. However, the parties did not agree on the geographic market.  Therefore, the FTC shouldered the burden of determining the geographic market.

The FTC’s attempt at defining the relevant geographic market failed because it excluded hospitals with relevant production, sales, or services; there was no economic basis for their hospital designations; and they ignored the “commercial realities” of the healthcare industry which point to a decrease in inpatient care and an increase in outpatient care, which effects whether or not a hospital or facility would participate in the monopoly. Because the FTC failed to define the geographic area that would be threatened by the merger, the court could not grant its motion for preliminary injunction.