The Federal Trade Commission said today it will seek a federal district court order to block the proposed merger of Lucy Lee Hospital, owned by Tenet Healthcare Corporation (Tenet), and Doctors Regional Medical Center (DRMC), the only two hospitals in Poplar Bluff, Missouri. The FTC will allege that the merger is a virtual merger to monopoly, with the combined firm holding 78 percent of the market for acute-care inpatient hospital services in the area in and around Butler County, Missouri. Health care purchasers, as well as consumers, would not turn to other hospitals in the area if the merged firm raised prices, the FTC alleged. According to the FTC, the only other hospitals within this geographic area, are far smaller and do not offer the breadth of services now offered by Tenet and DRMC. Thus, the merger, the agency said, would allow the combined firm to exercise market power and raise prices.
"Today, consumers in Poplar Bluff can choose between two financially strong hospitals. This acquisition would eliminate price, cost, and quality competition that now exists between these two hospitals and put consumers at risk of paying more for health care," said William J. Baer, Director of the FTC's Bureau of Competition. "That is why the Commission is asking the District Court to block the merger and preserve for consumers the benefits of competition."
The Missouri Attorney General's office, which has worked closely with Commission staff in this matter, has announced that it will file its own motion for a preliminary injunction to block the transaction.
Tenet Healthcare Corporation, based in Santa Barbara, California, owns and operates 124 general acute care hospitals, and is the second-largest for-profit hospital system in the United States. DRMC is owned by Poplar Bluff Physician Group, Inc., a for-profit entity owned primarily by 30 medical professionals practicing in Poplar Bluff.
The FTC will argue that the two hospitals have maintained vigorous head-to-head competition, which has resulted in low hospital prices and high quality care. In addition, according to the FTC, it is unlikely that new entry into the market -- due to certificate of need requirements and the delays associated with building a new hospital -- would defeat the anticompetitive effects of the transaction.
The FTC also will file in court signed declarations from many of the third party-payers and employers in the geographic area, who -- believing that the acquisition will lead to higher prices -- are voicing their opposition to the proposed merger.
The FTC is seeking a temporary restraining order and a preliminary injunction to prohibit the two hospitals from merging, pending the outcome of an administrative trial on the alleged antitrust law violations.
If the FTC obtains the injunctive relief it is seeking in federal district court, it will have 20 days to issue an administrative complaint detailing the alleged antitrust law violations. The administrative complaint is the first step in the administrative trial process.
Tenet and DRMC will be offered the FTC's "Fast Track" administrative trial procedure. If the hospitals elect the Fast Track, an initial decision by an administrative law judge would be due in six and one-half months, and a Commission opinion in 13 months.
The Commission vote to authorize filing of the motion for a temporary restraining order and a preliminary injunction was 5-0. The FTC will file the complaint in the U.S. District Court for the Eastern District of Missouri, Southeastern Division.
NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. The case will be decided by the court.
Copies of the court papers will be available upon filing from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-382-4357 (FTC-HELP); TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov
(FTC File No.: 971 0090)