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ProMedica Health Sys. v. FTC

United States Court of Appeals for the Sixth Circuit

March 7, 2013, Argued; April 22, 2014, Decided; April 22, 2014, Filed

File Name: 14a0083p.06

No. 12-3583

Opinion

 [*561]  [***2]   KETHLEDGE, Circuit Judge. This is an antitrust case involving a proposed merger between two of the four hospital systems in Lucas County, Ohio. The parties to the merger were ProMedica, by far the county's dominant hospital provider, and St. Luke's, an independent community hospital. The two merged in August 2010, leaving ProMedica with a market share above 50% in one relevant product market (for so-called primary and secondary services) and above 80% in another  [**2] (for obstetrical services). Five months later, the Federal Trade Commission challenged the merger under § 7 of the Clayton Act, 15 U.S.C. § 18. After extensive hearings, an Administrative Law Judge and later the Commission found that the merger would adversely affect competition in violation of § 7. The Commission therefore ordered ProMedica to divest St. Luke's. ProMedica now petitions for review of the Commission's order, arguing that the Commission was wrong on both the law and the facts in its analysis of the merger's competitive effects. We think the Commission was right on both counts, and deny the petition.

Lucas County is located in the northwestern corner of Ohio, with approximately 440,000 residents. Toledo lies near the county's center; more affluent suburbs lie to the southwest. Two-thirds of the county's patients have government-provided health insurance, such as Medicare or Medicaid. Twenty-nine percent of the county's patients have private health insurance, which pays significantly higher rates to hospitals than government-provided insurance does. (Medicare and Medicaid reimbursements generally do not cover the providers' actual cost of services.) A relatively large  [**3] proportion of the county's privately insured patients reside in the county's southwestern corner.

This case concerns the market—or markets, depending on how one defines them—for "general acute-care" (GAC) inpatient services in Lucas County. GAC comprises four basic categories of services. The most basic are "primary services," such as hernia surgeries,  [***3]  radiology services, and most kinds of inpatient obstetrical (OB) services. "Secondary services," such as hip replacements and bariatric surgery, require the hospital to have more specialized resources. "Tertiary services," such as brain surgery and treatments for severe burns, require even more specialized resources. And "quaternary services,"  [*562]  such as major organ transplants, require the most specialized resources of all.

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749 F.3d 559 *; 2014 U.S. App. LEXIS 7500 **; 2014 FED App. 0083P (6th Cir.) ***; 2014-1 Trade Cas. (CCH) P78,742; 2014 WL 1584835

PROMEDICA HEALTH SYSTEM, INC., Petitioner, v. FEDERAL TRADE COMMISSION., Respondent.

Subsequent History: Rehearing, en banc, denied by ProMedica Health Sys. v. FTC, 2014 U.S. App. LEXIS 14173 (6th Cir., July 24, 2014)

US Supreme Court certiorari denied by ProMedica Health Sys. v. FTC, 2015 U.S. LEXIS 3006 (U.S., May 4, 2015)

Prior History:  [**1] On Petition for Review of a Final Order of the Federal Trade Commission. No. 9346.

King v. ProMedica Health Sys., 129 Ohio St. 3d 596, 2011 Ohio 4200, 955 N.E.2d 348, 2011 Ohio LEXIS 2159 (2011)

CORE TERMS

merger, patients, effects, relevant market, secondary, products, market share, provider, tertiary, markets, rates, consumers, network, merging, concentrated, conditions, cluster, package, parties, prices, substitutes, competitor, antitrust, anticompetitive, analyzing, geographic, unilateral, firms, negotiating, enhance

Administrative Law, Judicial Review, Standards of Review, De Novo Standard of Review, Antitrust & Trade Law, Public Enforcement, US Federal Trade Commission Actions, Judicial Review, Substantial Evidence, Clayton Act, Scope, Mergers & Acquisitions Law, Antitrust, Antitrust Statutes, Clayton Act, General Overview, Merger Guidelines, Horizontal Mergers, Market Definition, Relevant Market, Geographic Market Definition, Product Market Definition, Market Definition, Defenses, Evidence, Inferences & Presumptions, Presumptions, Rebuttal of Presumptions, Abuse of Discretion, Remedial Powers, Remedies