As the victorious attorneys in the Joplin, Mo., and Dubuque, Iowa, hospital merger cases savor their wins over the government, the decisions in each case offer important antitrust lessons.
And perhaps the most important lesson is never underestimate the power of a friendly home-town judge who doesn't like federal bureaucracies.
While antitrust experts debate the legal intricacies of the respective rulings, the decisions demonstrate that hospital merger cases are a crapshoot once they get before a federal judge.
In the Joplin case, the Federal Trade Commission challenged the proposed merger of two of the city's three hospitals. In June, a federal district court denied the FTC's motion for a preliminary injunction that would have barred the merger until the agency's antitrust complaint was resolved. Last month, a federal appeals court upheld the district court's decision, and the FTC subsequently pulled the plug on its challenge (See related story, p. 12).
In Dubuque, the Justice Department challenged the proposed merger of the city's only two hospitals through a partnership deal. About 10 months after the trial ended, a federal district court dismissed the government's lawsuit in late October (Nov. 6, p. 10).
In both cases, the courts made several findings of importance to other merging hospitals and to FTC and Justice Department healthcare antitrust enforcers. But antitrust observers say the judges in both cases may have had certain biases that predisposed them to side with the hospitals.
In the Joplin case, the judge appeared to dislike federal agencies. His bias was noted by the federal appeals court that reviewed his decision.
When U.S. District Judge Dean Whipple initially denied the FTC's motion for a temporary restraining order, he said, "I don't think you've (the FTC) got any business being in here. I don't see how the Federal Trade Commission can claim there is lack of competition when there (are) four or five hospitals in the area, and reducing it by one is not going to wipe out competition...It looks to me like Washington, D.C., once again thinks they know better what's going on in southwest Missouri. I think they ought to stay in D.C."
The 8th U.S. Circuit Court of Appeals in St. Louis found nothing unreasonable in his ruling that would warrant it being overturned. However, it said it was "disturbed" by Whipple's statements of his personal opinions, calling his actions "injudicious." But the court concluded that the statements weren't so out of bounds as to prevent the FTC from getting a fair hearing.
Thomas Campbell, the antitrust attorney who represented the Joplin hospitals, dismissed Whipple's comments as "off the cuff" remarks that had no impact on the outcome of the case.
Meanwhile, the decision in the Dubuque case was rendered by U.S. District Judge Michael Melloy in Cedar Rapids, Iowa. Melloy is a Dubuque native and attended Loras College there as an undergraduate. He graduated from the University of Iowa School of Law and spent his entire career in Iowa.
"The fact that the judge was from Iowa affected his decision, maybe not directly, but subconsciously it played a part," said Jeff Miles, a healthcare antitrust attorney with Ober, Kaler, Grimes & Shriver in Washington.
According to Miles, federal district court judges such as Melloy run in the same social circles as local community leaders like hospital board members and they consider at some level what impact their decisions will have on their standing in the community.
Mark Horoschak, who recently left the FTC as its top healthcare antitrust enforcer to enter private practice, concurred: "The government often has no choice but to file the action in the community serviced by the hospitals. The judge is likely to be well-acquainted with the hospitals involved, and their officers and directors."
"You never know what's in a judge's mind, but there's no indication that that played a role in Dubuque," said David Ettinger, the antitrust attorney who represented the hospitals.
In his 76-page opinion, Melloy credits the leaders of the two hospitals for having only the truest of intentions.
"Individuals such as (Don) Moody and other proposed members of the....board have only the highest motives in proposing this merger," he wrote. "It is clearly their intent to provide high quality and efficient healthcare to the Dubuque community."