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Local Health System, Inc., of Port Huron, Michigan, and two other entities have agreed to settle Federal Trade Commission charges stemming from the proposed merger of Port Huron Hospital and Mercy Hospital-Port Huron, the two largest hospitals in St. Clair County, Michigan. Local Health System, Blue Water Health Services Corp. and Mercy Health Services have agreed under the settlement to abandon the proposed transaction and, for limited time periods, to notify the Commission or obtain Commission approval before acquiring certain hospital assets in the Port Huron area.

In November 1994, the FTC announced it would seek a court order to block the merger, alleging that the transaction would substantially reduce competition in the market for inpatient acute care hospital services in the Port Huron area. Under the challenged plan, Local Health System agreed in January 1994, to acquire Port Huron Hospital from Blue Water, and Mercy Hospital- Port Huron from Mercy Health, in a transaction valued at more than $110 million. The FTC alleged in a complaint filed in federal court that the transaction would eliminate a competitor from the market, enhance the market power of the leading firm in that market, and eliminate substantial competition between Mercy Hospital-Port Huron and Port Huron Hospital.

Before the court could rule on the FTC's request for a preliminary injunction to block the merger, the respondents abandoned the transaction. The settlement announced for public comment today would have the force of law and would require the respondents to terminate their merger agreement. Consistent with the Commission's recently announced new policy with respect to prior approval provisions in orders, the settlement would require that Local Health System, Blue Water, and Mercy Health obtain -- for a period of three years -- approval from the FTC before:

  • acquiring a majority of the assets of any acute care hospital facility operated by any of the other respondents in a five-city area called "Greater Port Huron;" and

  • acquiring any majority or controlling share of stock or other interest in any other respondent that operates any acute care hospital facility in Greater Port Huron.

Further, because future transactions by Port Huron likely will not be reportable under HSR, the settlement contains prior- notification provisions that, for 10 years, would require the respondents to inform the Commission and wait 30 days before:

  • acquiring any stock, interest in, or assets of any acute care hospital facility in Greater Port Huron;

  • entering into any agreement or other arrangement to obtain direct or indirect ownership, management or control of any acute care hospital facility in Greater Port Huron; or

  • permitting any acute care hospital facility operated by the respondents to be acquired by any person who operates, or who will operate immediately following such acquisition, any other acute care hospital facility in Greater Port Huron.

There are exceptions to the prior notification requirements for acquisitions valued below $1 million, and for such things as the establishment of a new acute care hospital that is a replacement for a respondent's existing facility.

Under the proposed settlement, for 10 years, if any respondent sells any substantial part of any acute-care hospital facility it operates in the Greater Port Huron area, the buyer would have to agree in writing to be bound by the terms of the settlement.

Finally, the proposed settlement contains a number of reporting requirements designed to help the FTC monitor the respondents' compliance.

The proposed consent agreement will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future violations. Each violation of such an order may result in a civil penalty of up to $10,000.

Copies of the complaint and proposed consent agreement, as well as an analysis of the agreement to aid in public comment, and the statement by Commissioner Azcuenaga, are available from are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's 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. 941 0076)

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