Antitrust Law Review and Hospital Corporation of America V Federal Trade Commission Filetypedoc

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Brief Fact Summary. An administrative law judge (ALJ) found that Evanston Northwestern Healthcare Corp (ENH) (Defendant) violated federal antitrust law when it caused Highland Park Hospitals, as the transaction lessened competition considerably in the Northern Illinois marketplace for acute-intendance inpatient services.  The ALJ ordered Accused to divest itself of Highland Park Hospital.  Defendant appealed.

Synopsis of Rule of Police. Where a health care corporation'southward acquisition of a hospital lessens competition considerably in the Northern Illinois market for acute-intendance inpatient services, divestiture is not warranted vii years after the merger.

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Facts. Before the merger, Evanston Northwestern Healthcare Corp. (ENH) (Defendant) owned Evanston Hospital and Glenbrook Hospital, both in Cook County, Ill.  In January 2000, Accused acquired Highland Park, the nearest hospital to the n.  There are other hospitals in the expanse, including 9 facilities that are closer to Evanston, Glenbrook, or Highland Park than they are to each other, but there are no other hospitals within the triangle formed by the iii ENH (Defendant) hospitals.  The Federal Trade Commission (FTC) (Plaintiff) filed a complaint in February 2004, challenge that Defendant'southward merger with Highland Park caused less competition and higher prices for insurers and wellness care consumers for general acute-care inpatient services sold to managed care organizations in the relevant geographic market.  In October 2005, an authoritative law judge institute that Defendant exercised its enhanced ability to obtain price increases considerably above its premerger prices and considerably larger than price increases obtained by other comparison hospitals.  Defendant was ordered to divest of Highland Park.

Issue. Where a health care corporation's acquisition of a hospital lessens contest considerably in the Northern Illinois market for acute-care inpatient services, is divestiture warranted seven years after the merger?

Held. [Commissioner not stated in casebook excerpt.]  No.  Where a health care corporation'due south conquering of a hospital lessens competition considerably in the Northern Illinois market for acute-intendance inpatient services, divestiture is not warranted seven years afterwards the merger.  The evidence shows that the transaction enabled the merged firm to exercise marketplace power that was not offset by merger-specific efficiencies, that senior Evanston and Highland Park senior officials anticipated the merger would give them greater leverage for raising prices, that the merged firm did raise its prices immediately and considerably later completion of the transaction, and that the aforementioned senior officials attributed the price increases in office to increased bargaining leverage the merger had produced.  Clearly Defendant violated § 7 of the Clayton Act, and an administrative law judge reasonably ordered the divestiture of Highland Park from ENH (Defendant), considering divestiture is the preferred remedy for challenges to unlawful mergers.  It is, yet, impractical seven years later the merger, as substantial costs would be incurred to reach divestiture, and it would upset the efficiencies now in place in the combined facility.  A improve, if junior, remedy at this point is to require Defendant to establish independent negotiating teams—one for Accused'due south Evanston and Glenbrook hospitals, and another for Highland Park—to allow managed care organizations to negotiate split contracts for the hospitals.  The injunction remedy is not ideal, only it volition allow managed care organizations to negotiate separately once more for these competing hospitals, thereby reintroducing contest between them for the business of managed care organizations.

Discussion. The traditional remedy in a merger case is divestiture, and the proposed remedy in this instance—independent contract negotiating teams—could exist impractical as there are difficulties associated with protecting confronting sharing of data, deliberately or non, about the separate managed care contracting efforts.  Nevertheless, Plaintiff arguably had no selection but to reject divestiture.  It would have been a real challenge to undo the merger later on vii years.

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Source: https://www.casebriefs.com/blog/law/health-law/health-law-keyed-to-furrow/antitrust/in-the-matter-of-evanston-northwestern-healthcare-corp/