Merger of Only Two Hospitals in Poplar Bluff, Mo., Would Violate Antitrust Laws, FTC Charges

The Federal Trade Commission yesterday issued an administrative challenge to the $40 million proposed merger of Lucy Lee Hospital, owned by Tenet Healthcare Corporation (Tenet), and Doctors Regional Medical Center (DRMC), the only two general hospitals in Poplar Bluff, Missouri. According to the FTC's complaint, the 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. If the FTC's charges are upheld at the conclusion of an administrative trial, the agency is seeking an order that would prohibit the parties from consummating or would require them to undo the merger.

The administrative complaint follows a preliminary injunction proceeding initiated jointly by the FTC and the Missouri Attorney General in federal district court. On July 30, the U.S. District Court for the Eastern District of Missouri issued a preliminary injunction blocking the proposed transaction pending the outcome of an administrative trial before the FTC.

On August 10, Tenet and DRMC filed a notice of appeal of the District Court's decision.

Tenet, based in Santa Barbara, California, owns and operates over 120 general acute care hospitals in the United States, including Lucy Lee Hospital in Poplar Bluff. In fiscal year 1997, Tenet had total sales of about $8.7 billion, and Lucy Lee had total sales of over $54 million.

DRMC is owned by Poplar Bluff Physician Group, Inc., a for-profit entity owned primarily by 30 medical professionals practicing in Poplar Bluff. In fiscal year 1997, DRMC had total sales of over $41 million.

According to the FTC's administrative complaint, the only other hospitals within the region surrounding Poplar Bluff are far smaller and do not offer the broad range of general acute care services now offered by Tenet and DRMC. In addition, according to the FTC, there are no specialty hospitals, non-hospital outpatient surgery centers, or any other health facilities that are significant competitive alternatives to Lucy Lee or DRMC in and around Butler County, Missouri. The complaint also alleges that the market is highly concentrated, and that certificate of need requirements and other entry delays, make it unlikely that new entry into the market would defeat the anticompetitive effects of the transaction.

The FTC said that it would seek an order that would prohibit Tenet and DRMC from consummating the proposed merger. In addition, the FTC may prohibit, for five years, any transaction between the parties that combines their hospitals or other health facilities in the relevant market without prior notice to the FTC.

The Commission vote to issue the administrative complaint was 4-0.

NOTE: The Commission issues 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 issuance of a complaint is not a finding or ruling that the respondent has violated the law. The complaint marks the beginning of a proceeding in which the allegations will be ruled upon after a formal hearing.

Copies of the administrative complaint and notice of contemplated relief, will be available shortly from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD 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 File No. 971 0090)