8 FTC Interventions in Healthcare M&A Deals

Are you playing M&A chess or Pac-Man?
Are you playing M&A chess or Pac-Man?

In our new book we use chess as metaphor for health system planning.  Unfortunately, health system mergers and acquisitions often look more like the video game Pac-Man to the Federal Trade Commission (FTC) than chess.  Because buyers appear to be gobbling up competitors and creating regional monopolies, the FTC is constantly intervening in purchases of physician practices and hospitals.

Here are eight FTC interventions in healthcare deals during the past five years.

  1. 7/24/2009: The FTC issued an administrative complaint challenging Carilion Clinic’s 2008 acquisition of two outpatient clinics in the Roanoke, Virginia, area. Prior to the acquisition, the Center for Advanced Imaging (CAI) and the Center for Surgical Excellence (CSE) had strong reputations for offering high-quality care and convenient services at prices much lower than Carilion. The complaint alleged that Carilion’s acquisition of these outpatient centers eliminated vital competition in violation of federal antitrust laws and led to higher healthcare costs and reduced incentives to maintain and improve service and quality of care for patients in the Roanoke area.[i] The parties settled in December 2009, and Carilion agreed to divest the two centers to entities approved by the FTC.[ii]
  2. 4/20/2011: The FTC challenged Phoebe Putney Health System, Inc.’s (Phoebe’s) proposed acquisition of rival Palmyra Park Hospital, Inc. (Palmyra) from HCA, in Albany, Georgia. The FTC’s administrative complaint alleged that the deal would reduce competition significantly and allow the combined Phoebe/Palmyra to raise prices for general acute-care hospital services charged to commercial health plans, substantially harming patients and local employers and employees. The parties settled in August 2013.[iii],[iv]
    Often the FTC points to unfair price increases as a side effect of hospital mergers and acquisitions.
  3. 3/28/2012: The FTC ruled that ProMedica Health System’s August 2010 acquisition of rival St. Luke’s Hospital was anticompetitive and likely to substantially lessen competition and increase prices for general acute-care inpatient hospital services and inpatient obstetric services sold to commercial health plans in the Toledo, Ohio area. In a 4-0 decision, the Commission ordered ProMedica to divest St. Luke’s Hospital to an FTC-approved buyer within six months after the Commission’s order became final and effective.[v]
  4. 4/13/2012: The FTC dismissed the complaint it issued in November 2011 seeking to block OSF Healthcare System’s acquisition of rival healthcare provider Rockford Health System in light of OSF Healthcare’s decision to abandon the proposed transaction. The Commission voted 5-0 to dismiss the complaint after OSF announced it would no longer seek to complete the acquisition.[vi]
  5.  8/06/12: Renown Health, the largest provider of acute care hospital services in northern Nevada, released its staff cardiologists from non-compete contract clauses, allowing up to 10 of their cardiologists to join competing cardiology practices. Renown Health has agreed to settle FTC charges that its recent acquisitions of two local cardiology groups reduced competition for the provision of adult cardiology services in the Reno area. In 2010 and 2011, Renown acquired Sierra Nevada Cardiology Associates (15 cardiologists) and Reno Heart Physicians (16 cardiologists), giving it an 88% market share for cardiology services in the area.[vii]
    The FTC ordered Renown to release 10 cardiologists from their non-compete covenants.
  6. 11/16/2012: The FTC blocked Reading Health System’s proposed acquisition of Surgical Institute of Reading L.P. (SIR), alleging that the combination of the two healthcare providers would substantially reduce competition in the area surrounding Reading, Pennsylvania, and lead to reduced quality and higher healthcare costs for the area’s employers and residents. The FTC, jointly with the Pennsylvania Attorney General, filed a complaint in federal district court seeking a preliminary injunction to stop the deal pending an administrative trial.[viii]
  7. 3/12/2013: The FTC and the Idaho Attorney General announced they will file a complaint in federal district court seeking to block St. Luke’s Health System, Ltd.’s acquisition of Idaho’s largest independent, multispecialty 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 healthcare services provided by primary care physicians (PCPs) in Nampa, Idaho. St. Luke’s is a not-for-profit health system with headquarters in Boise, Idaho. It owns and operates six hospitals. Before being acquired by St. Luke’s, Saltzer was a for-profit, physician-owned, multispecialty group located in Nampa. With approximately 44 physicians, Saltzer was the largest and oldest independent multispecialty physicians’ group in Idaho. Its specialties include family practice, internal medicine, and pediatrics.[ix]   In January of 2014, 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.[x]
    With the CYH-HMA merger, the FTC ordered that hospitals be spun off in certain markets
  8. 1/22/2014: In relation to a national merger with HMA, the FTC required Community Health Systems (NYSE: CYH) to sell the Riverview Regional Medical Center and related operations and businesses near Gadsden, Alabama, and the Carolina Pines Regional Medical Center and related operations and businesses near Hartsville, South Carolina, to FTC-approved buyers within six months.[xi]  According to the FTC, the merger would result in substantially less competition for general acute care inpatient services sold to commercial health plans and provided to commercially insured patients in these markets in Alabama and South Carolina, as well as eliminate valuable price and quality competition that has benefitted local patients.

We’ve noticed that there are striking similarities between the FTC’s interventions in health system acquisitions and the events leading up to the Justice Department’s break-up of the AT&T monopoly in the late 1970s and early 1980s.  You can read a complete analysis of these similarities, and the implications for U.S. health systems, in our new book Doctor Deals.



[i] Federal Trade Commission. Accessed March 2014. “FTC Challenges Carilions Acquisition of Outpatient Medical Clinics.”http://www.ftc.gov/opa/2009/07/carilion.shtm.

[ii] Federal Trade Commission. Accessed March 2014. “Commission Order Restores Competition Eliminated by Carilion Clinics Acquisition of Two Outpatient Clinics.”http://www.ftc.gov/opa/2009/10/carilion.shtm.

[iii] Federal Trade Commission. Accessed March 2014. “Phoebe Putney Health System, Inc., Phoebe Putney Memorial Hospital, Inc., Phoebe North, Inc., HCA Inc., Palmyra Park Hospital, Inc., and Hospital Authority of Albany-Dougherty County, In the Matter of.”http://www.ftc.gov/os/adjpro/d9348/130222ccmoliftstay.pdf.

[iv] Federal Trade Commission. Accessed April 2014. “Hospital Authority and Phoebe Putney Health System Settle FTC Charges That Acquisition of Palmyra Park Hospital Violated U.S. Antitrust Laws.”http://www.ftc.gov/news-events/press-releases/2013/08/hospital-authority-and-phoebe-putney-health-system-settle-ftc.

[v] Federal Trade Commission. Accessed March 2014. “Citing Likely Anticompetitive Effe”cts, FTC Requires ProMedica Health System to Divest St. Luke’s Hospital in Toledo, Ohio, Area.”http://www.ftc.gov/opa/2012/03/promedica.shtm.

[vi] Federal Trade Commission. Accessed March 2014. “OSF Healthcare System Abandons Plan to Buy Rockford in Light of FTC Lawsuit; FTC Dismisses its Complaint Seeking to Block the Transaction.”http://www.ftc.gov/opa/2012/04/rockford2.shtm.

[vii] Federal Trade Commission. Accessed March 2014. “FTC Order Will Restore Competition for Adult Cardiology Services in Reno, Nevada.”http://www.ftc.gov/opa/2012/08/renownhealth.shtm.

[viii] Federal Trade Commission. Accessed March 2014. “FTC and Pennsylvania Attorney General Challenge Reading Health Systems Proposed Acquisition of Surgical Institute of Reading.”http://www.ftc.gov/opa/2012/11/reading.shtm.

[ix] Federal Trade Commission. Accessed March 2014. “FTC and Idaho Attorney General Challenge St. Luke’s Health System’s Acquisition of Saltzer Medical Group as Anticompetitive.”http://www.ftc.gov/opa/2013/03/stluke.shtm.

[x] Federal Trade Commission. Accessed March 2014. “Statement of FTC Chairwoman Edith Ramirez on the U.S. District Court in the District of Idaho Ruling in the Matter of the Federal Trade Commission and the State of Idaho v. St. Luke’s Health System Ltd. and Saltzer Medical Group, P.A.”http://www.ftc.gov/news-events/press-releases/2014/01/statement-ftc-chairwoman-edith-ramirez-us-district-court-district

[xi] Federal Trade Commission. Accessed May 2014. “Divestitures Will Preserve Competition in Local Markets in Alabama and South Carolina.”http://www.ftc.gov/news-events/press-releases/2014/01/ftc-requires-community-health-systems-inc-divest-two-hospitals.