The Federal Trade Commission voted 3-2 last week to go to federal court in an effort to block 602-bed Lee Memorial Hospital's planned acquisition of 201-bed Cape Coral (Fla.) Hospital.
The two Fort Myers, Fla.-area hospitals have vowed to fight the move. The FTC has charged that the acquisition of Cape Coral "would significantly decrease competition for inpatient, acute-care hospital services" in Lee County.
A Cape Coral-Lee Memorial combination would control 67% of the admissions in the five-hospital Lee County market. Two of the competing hospitals are owned by Columbia/HCA Healthcare Corp., and the third is owned by HealthTrust-The Hospital Co.
Cape Coral is a not-for-profit hospital, and Lee Memorial is a public facility.
The FTC also alleges that fewer hospitals competing for managed-care contracts would reduce the ability of HMOs and other insurers to negotiate discounts for inpatient services and hamper their ability to contain costs.
But one dissenting commissioner, Deborah K. Owen, said that she believed that the acquisition was exempt from antitrust laws because Lee Memorial, as a public hospital, is protected by the "state action doctrine."
Lee Memorial's attorneys are expected to use the state action doctrine as a defensive position at trial. Under the doctrine, activities that are authorized by state law and actively monitored by the state are exempt from federal antitrust laws.
Attorneys familiar with the doctrine, however, said case law is mixed on whether it can protect clearly anti-competitive mergers or other activities. Another aspect of the case will hinge on whether the state actually would "monitor" the new hospital and what action it would take if monopolistic pricing strategies occurred, attorneys said.
Lee Memorial's position is that it has a publicly elected 10-member board that is a political subdivision of the state. Therefore, as a state body, its board is acting on behalf of the state to monitor the hospital, executives contend.
The complaint was expected to be filed last week in U.S. District Court in Tampa, Fla., an FTC spokesman said. It will seek a temporary restraining order and a preliminary injunction.
A Lee Memorial spokeswoman said the board has agreed to delay its planned closing for an indefinite period.