Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC conditionally approves combination of hospital operators, (Jan 23, 2014)

By Linda O’Brien, J.D., LL.M.

One of the nation’s largest hospital operators, Community Health Systems, Inc. (CHS), has agreed to divest two hospitals and related assets, including outpatient facilities, in Alabama and South Carolina, to win FTC approval of its proposed $7.6 billion acquisition of rival health system Health Management Associates, Inc. (HMA), the FTC announced yesterday. According to the agency, the divestitures will preserve competition in the local markets in Alabama and South Carolina (In re Matter of Community Health Systems, Inc., File No. 131-0202).

CHS is a for-profit health system headquartered in Franklin, Tennessee, that owns 135 hospitals in 29 states. CHS is the second-largest hospital chain in the United States, and generated about $13 billion in revenue in 2012. Headquartered in Naples, Florida, HMA is a for-profit health system that owns 71 hospitals in 15 states. In 2012, HMA generated $5.9 billion in revenue.

According to the FTC complaint, the acquisition would likely substantially lessen competition for general acute care (GAC) inpatient services sold to commercial health plans and provided to commercially insured patients in two local markets: 1) Etowah County, including the city of Gadsden, Alabama; and 2) Darlington County, South Carolina. Absent relief, CHS’s acquisition of HMA would eliminate valuable price and quality competition that has benefitted local patients in these two markets.

In the Gadsden, Alabama area, the transaction would have combined HMA’s Riverview Regional Medical Center with CHS’s Gadsden Regional Medical Center, the only other significant hospital in the Gadsden area, leading to a near-monopoly in GAC services provided to commercially insured patients. In the Darlington County area, the deal would have combined CHS’s Carolinas Hospital-Florence and HMA’s Carolina Pines Regional Medical Center, reducing the number of significant competing providers of GAC services to commercially insured patients from three to two.

Under the proposed consent order to settle the charges CHS will sell the Riverview Regional Medical Center and all of its associated operations and businesses near Gadsden, Alabama, and the Carolina Pines Regional Medical Center and of its associated operations and businesses near Hartsville, South Carolina, to Commission-approved buyers within six months after the order is issued.

The proposed settlement also requires the companies to hold separate the assets to be divested and to maintain their economic viability, marketability, and competitiveness until the sales are complete. CHS also is required to provide the Commission prior notice of any acquisition of a GAC inpatient services provider in these areas for 10 years.

Companies: Community Health Systems, Inc.; Health Management Associates, Inc.

News: Antitrust FederalTradeCommissionNews