A federal judge has approved a merger of the two largest hospitals in Grand Rapids, Mich.
U.S. District Judge David McKeague of Lansing, Mich., denied a Federal Trade Commission request for a preliminary injunction to block the joining of Blodgett Memorial Medical Center and Butterworth Health System.
However, the judge required the hospitals to sign a consent decree incorporating the terms of their "community commitment," including promises to freeze prices for three years and limit increases to the Consumer Price Index for four years after that.
The FTC, which filed for the injunction in January, will decide in coming weeks whether to appeal or to proceed with an administrative review of the transaction.
The hospitals said they would not go ahead with the merger until the FTC decides whether it will press ahead with a review of the deal. Hospital executives also have two weeks to decide whether to sign the consent decree.
The FTC argued that the deal would reduce competition and potentially lead to higher prices. Blodgett, with 515 licensed beds, and Butterworth, with 529, account for 73% of the inpatient revenues in Kent County, Mich.
In a 44-page opinion, the judge agreed with much of the FTC's case, including the fact that the deal would consolidate substantial market power.
However, McKeague said, the merger was unlikely to hurt consumers. He said there were several factors that protected consumers, including the hospitals' not-for-profit status, that fact that their boards are composed of prominent community and business leaders, their pricing commitment, and the anticipated cost savings and efficiencies.
At a joint news conference last week, the hospitals reaffirmed their seven-year "community commitment" to share an expected $170 million cost savings from the merger with the community. In addition to the pricing promises, the commitment includes an agreement to equalize payments to managed-care companies (Feb. 19, p. 26).
The Grand Rapids deal marks the third consecutive hospital merger case that federal antitrust agencies have lost in court. Last year the federal government lost cases in Joplin, Mo., and Dubuque, Iowa.