Finally freed of a Federal Trade Commission antitrust suit, a Joplin, Mo.-based health system has taken up its regional expansion again.
"There is a sense of absolute relief and an immediate and corresponding sense of responsibility to make up tremendous lost ground," said Kelby Krabbenhoft, president of Freeman Hospitals and Health System.
FTC commissioners voted 5-0 on Dec. 1 to dismiss an administrative challenge of the March merger of 203-bed Freeman Hospital and 96-bed Oak Hill Hospital, which created the system. Their decision came after the 8th U.S. Circuit Court of Appeals in St. Louis upheld a lower court ruling against the FTC (Nov. 6, p. 8).
The FTC action ends its often-criticized effort, launched last summer, to prove the merger would damage competition. U.S. District Judge Dean Whipple in Kansas City, Mo., called the FTC case "mind-boggling" when he refused an injunction (June 12, p. 4).
Freeman and Oak Hill are two of three hospitals in Joplin, a city of 42,000 people in southwest Missouri. Freeman also owns 67-bed Freeman Neosho Hospital, about 25 miles away in Neosho, Mo. The third hospital in Joplin is 331-bed St. John's Regional Medical Center.
Some local employers also criticized the FTC, arguing that St. John's is a potent and sufficient competitor.
"They wasted a lot of taxpayer resources looking at the issue," said John Hale, chairman of the Tri-state Healthcare Coalition, which negotiates direct contracts for 27 self-insured firms employing 10,800 people in the region.
Hale also is vice president of human resources at Carthage, Mo.-based Leggett & Platt, a Fortune 500 company that employs about 2,000 people regionally and about 15,500 nationally.
Oak Hill needed to close or merge, and a local partnership will serve Joplin better than other options, such as a sale to a national chain, Hale said.
"Our view as a national employer is that national chains' pricing are pretty average at best, and our pricing in Joplin is somewhat lower," he said.
Oak Hill lost $3.2 million on revenues of $40 million from Jan. 1 to Nov. 1, Krabbenhoft said. In comparison, the Freeman hospitals earned $3.5 million on revenues of $175 million.
The whole system recorded an operating loss of about $500,000 because it formed a group practice for 85 employed physicians and 25 doctors under practice management contracts, Krabbenhoft said.
Its battle with the FTC cost $2.5 million in legal and consulting fees, he said. Freeman now is considering legal action against the FTC but probably won't take any, Krabbenhoft said. "I think it is probably best to put it behind us. We'll continue regionalization," he said.
Earlier this month, Freeman added an HMO license to its repertoire. In November, it acquired a Joplin-based chain of mental-health clinics.