The U.S. Justice Department and the state of Florida late last week filed a federal antitrust lawsuit against the proposed merger of two hospital systems in western Florida.
The agencies said the lawsuit is the first-ever joint state and federal civil antitrust action against corporations in any industry, not just healthcare.
The systems hit with the lawsuit are Morton Plant Health System in Clearwater, Fla., and Mease Health Care in nearby Dunedin, Fla. Morton Plant operates 672-bed Morton Plant Hospital in Clearwater. Mease operates two hospitals, a 278-bed facility in Dunedin and a 100-bed facility in Safety Harbor, Fla.
The lawsuit is the first filed by the Justice Department against a hospital merger since 1988, when it challenged deals in both Roanoke, Va., and Rockford, Ill. It lost the Roanoke case but won the Rockford case.
The lawsuit also is somewhat surprising to many healthcare antitrust observers, who have watched the Justice Department clear a number of hospital mergers recently resulting in high market shares. They include deals in Des Moines, Iowa; Davenport, Iowa; and Manchester, N.H. The clearances followed statements by the Clinton administration indicating its support of a more lenient antitrust policy toward healthcare providers.
The new lawsuit also is the second pending antitrust suit against a proposed hospital transaction in Florida. The Federal Trade Commission is challenging a hospital acquisition in Lee County, about 90 miles south of Pinellas County, where the Justice Department action is taking place (May 2, p. 6; see related story, p. 16).
Mortan Plant and Mease executives said they were disappointed with the government's action, and they said they would make a decision within "a few days" to fight the challenge in court or scrap their consolidation plans.
"This merger would have been a perfect example of what everyone wants out of reform-better access to primary care, improved quality through a sharing of knowledge and experience, and cost efficiencies realized through shared equipment and staffing," said Mease Chief Executive Officer Philip Beauchamp.
The systems announced their merger plans last fall, and they later said a financial analysis indicated that a consolidation could generate more than $80 million in cost savings over a five-year period (Oct. 25, 1993, p. 12). In 1993, the systems had combined net patient revenues of about $205 million, according to the Justice Department.
But the government, which began investigating the deal earlier this year, reached a different conclusion about the systems' possible consolidation.
In its complaint, the government said the merger would violate Section 7 of the Clayton Act, which bars acquisitions that may reduce competition. A merger would give the systems control of 58% of the acute-care hospital beds in northern Pinellas County, which is on Florida's western coast.
The entire county, with a population of 850,000, has 15 acute-care hospitals with 3,578 staffed beds, according to the latest figures from the American Hospital Association. A merger would give Morton Plant and Mease control of 20% of the hospitals and 31% of the beds in the county.
"Unless prevented, this combination is likely to substantially lessen competition in the provision of acute-inpatient hospital services, reduce the number of competitive alternatives available to healthcare consumers and result in higher prices for acute inpatient hospital services in north Pinellas County," the lawsuit said.
State and federal officials filed suit on May 5 in U.S. District Court in Tampa, seeking a court order barring the systems from merging. A trial date hasn't been set.