Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Capella Healthcare abandons FTC-opposed plan to acquire Mercy Hot Springs, (Jun 28, 2013)

By Tobias J. Gillett, J.D., LL.M.

Capella Healthcare will not proceed with its plans to acquire the Mercy Hot Springs health system from Mercy Health, the FTC and the parties to the transaction have announced.

Capella planned to combine its National Park Medical Center with its Hot Springs, Arkansas rival Mercy Hot Springs, for a purchase price of approximately $167.5 million. The parties’ Asset Purchase Agreement, which had already been extended once, would have expired this week.

The FTC, which had been investigating the transaction for months, issued a statement welcoming the announcement.

“The fact that this acquisition will not proceed is a victory for local businesses and patients, as it will preserve access to low-cost, high-quality healthcare for the citizens of Hot Springs, Arkansas,” said Richard Feinstein, Director of the Federal Trade Commission’s Bureau of Competition. “We had informed Capella Healthcare and Mercy Hot Springs that we had serious concerns about the likely anticompetitive harm that would have resulted if the transaction was completed, and that we were prepared to challenge the transaction. Staff gathered testimonial, documentary, and economic expert evidence that this transaction was anticompetitive and would likely have resulted in higher prices and diminished health care service in Hot Springs.”

However, Mercy Health and Capella Healthcare issued a joint press release, expressing disappointment about the failure of the acquisition. The parties claimed the transaction would have resulted in a “stronger, more efficient healthcare delivery system” for the Hot Springs region, which could have competed with healthcare systems in nearby Little Rock.

“Because we anticipate continued challenges—over an indefinite timeline—in obtaining the needed approvals, Capella and Mercy have mutually agreed to not renew our Asset Purchase Agreement and will end our discussions at this time,” said Lynn Britton, President and CEO of Mercy. “We believe prolonging this uncertain and complicated path is not in the best interest of our local caregivers and the community. However, we remain committed to finding the right solution for enhancing healthcare in Hot Springs.”

“This is a difficult decision for both Capella and Mercy, especially given the tremendous amount of work and local support to bring together these two organizations,” said Dan Slipkovich, Chief Executive Officer of Capella. “Capella and Mercy will separately explore how to best move forward in the coming weeks.”

Capella Healthcare is a Franklin, Tennessee-based for-profit health care system that owns and/or operates 14 acute care and specialty hospitals in six states. Mercy is a not-for-profit Catholic health care system that includes 32 hospitals and more than 300 outpatient facilities in four states, with outreach ministries in three other states.

Companies: Capella Healthcare; Mercy Health

News: Antitrust FederalTradeCommissionNews