The American Hospital Association took a rare step and entered an antitrust dispute by filing a brief supporting two Joplin, Mo., hospitals.
The friend-of-the-court brief was filed Aug. 10 in the 8th U.S. Circuit Court of Appeals in St. Louis, where 167-bed Freeman Hospital and 96-bed Oak Hill Hospital are battling with federal regulators over their merger.
The AHA argues that hospitals deserve special treatment when courts rule on definitions of their markets.
Only part of hospital business is sensitive to prices, it says, so restrictive market definitions exaggerate the potential harm to consumers. In addition, the AHA contends that hospital mergers are especially beneficial to consumers because there is so much excess capacity in the industry. Therefore, courts should be particularly careful that market definitions are precise.
Freeman and Oak Hill are two of three hospitals in Joplin, a city of 42,000 in southwest Missouri. Freeman also owns 67-bed Freeman Neosho (Mo.) Hospital, located about 25 miles southeast of Joplin.
The hospitals merged in March after a lower court refused to issue a temporary restraining order against the deal (March 6, p. 8). The Federal Trade Commission appealed the case, and oral arguments before the appeals court are set for Sept. 12. The hospitals have been ordered to operate separately until the appeal is considered.
The dispute revolves around the definition of the hospitals' market. The FTC has proposed markets in which the merged organization would compete against three to five hospitals. In the hospitals' analysis, the merged company would compete against 14 other hospitals.
In its brief, the AHA argued that the FTC should have looked at where patients would seek care if hospital prices rose instead of where they now obtain services. "In other words, the analysis must be `dynamic' rather than `static.' By failing to present any significant evidence relevant to a dynamic analysis of the geographic market, the government failed to establish a properly defined market."
"We were delighted that (the AHA) weighed in," said Thomas Campbell, the attorney for Freeman and Oak Hill.
"(The market definition) really is the key determinant of whether someone has market power. Unfortunately, the FTC has never articulated very well how you go about market definition."
The AHA rarely involves itself in particular antitrust disputes because siding with one set of hospitals is likely to upset competing AHA members.
For example, in 1989, the AHA backed away from plans to file a brief in the antitrust case of two Rockford, Ill., hospitals after a competitor and AHA member, St. Anthony Medical Center, complained.
Campbell defended the two Rockford hospitals in the Justice Department's suit to block their merger. In 1990, the 7th U.S. Circuit Court of Appeals affirmed a decision permanently enjoining their merger.