Hospitals that believe antitrust laws and enforcement policies are standing in the way of their mergers received some welcome news last week when a Federal Trade Commission official said she expects the agency to challenge fewer hospital transactions.
The reduction in enforcement actions likely will be the result of a more thoughtful, "holistic" examination of a proposed merger rather than continued reliance on narrow guidelines, said FTC Commissioner Christine Varney.
According to a General Accounting Office report released last fall, the FTC and Justice Department combined blocked fewer than 4% of nearly 400 proposed hospital mergers from 1981 through 1993 (Sept. 12, 1994, p. 6).
Varney spoke last week at a healthcare antitrust conference in Chicago sponsored by the Blue Cross and Blue Shield Association; the law firm of Gardner, Carton & Douglas; Lexecon; and MODERN HEALTHCARE.
Varney said the FTC's chief criterion for judging the competitive impact of a proposed hospital merger or acquisition will be whether the transaction "provides better healthcare services to more people at a lower cost."
Specifically, Varney said the agency intends to take a more lenient position on the possible economic efficiencies of a merger or acquisition.
Historically, the FTC and Justice Department may have decided to overlook a deal's resulting high market share if the transaction resulted in significant economic savings that would be passed along to consumers. The evidence of efficiencies and the pass-through to consumers had to be "clear and convincing."
But Varney said that standard may be so strict that no one can meet it. "I would instead take the view that where a merger does not impose a severe threat to competition, efficiencies should be presumed to flow to the benefit of consumers," she said.
Thomas Campbell, an antitrust attorney with Gardner, Carton & Douglas, called Varney's statement "a real breath of fresh air."
Campbell applauded the FTC's effort to abandon the strict requirements of the efficiencies standard, calling the new approach outlined by Varney more realistic and helpful.
William Kopit, an antitrust attorney with the law firm of Epstein, Becker & Green in Washington, echoed Campbell's reaction.
"It's hard to tell whether Commissioner Varney's position now represents the FTC's current view on efficiencies. But if it does, it's a significant change, and it will make it a lot easier to get mergers through," Kopit said.
Meanwhile, Anne Bingaman, assistant attorney general in charge of the Justice Department's antitrust division, who also spoke at the conference last week, commented on the department's pending antitrust lawsuit against a proposed "partnership" of two hospitals in Dubuque, Iowa (See related story, p. 22).
Antitrust attorneys privately have been speculating that the department may back off hospital merger enforcement if it loses in Dubuque.
But Bingaman said otherwise.
"I honestly hope we win in Dubuque," she said. "But our enforcement policy won't change regardless of the outcome."