If history is any indication, Tenet Healthcare Corp.'s proposed acquisition of OrNda HealthCorp will face little federal antitrust opposition.
All the major for-profit hospital chain mergers of the past several years have received federal antitrust approval, albeit some with minor divestiture requirements.
For example, the Federal Trade Commission allowed Columbia/HCA Healthcare Corp. to merge with Galen Health Care, Hospital Corporation of America and Healthtrust-three separate mega-deals involving hundreds of hospitals-by requiring Columbia to sell a total of nine hospitals to gain antitrust clearance. Seven of the nine, in fact, were part of the Healthtrust deal, and only two were part of the Galen and HCA mergers.
Moreover, in the rare instance when a federal antitrust agency has challenged a deal, the merging hospitals have been winning in federal court.
"This deal will go through with maybe a few divestitures required," said John Cusack, a healthcare antitrust attorney with Gardner, Carton & Douglas in Chicago. "They're going to have some problems in Southern California and maybe some problems in some markets in Florida."
Tenet and OrNda do have competing hospitals in at least six cities across the country, according to the American Hospital Association. In theory, those markets could create antitrust problems for the two chains.
Four of the six markets are in California: Los Angeles, Monterey Park, San Diego and San Luis Obispo. The other two are Houston and Fort Lauderdale, Fla.
Of those, San Luis Obispo, a city of about 42,000 some 195 miles north of Los Angeles along the Pacific coast, may present the biggest antitrust hurdle. The deal would give Tenet control of two of the city's three hospitals and about 87% of its staffed beds. Tenet owns 178-bed Sierra Vista Regional Medical Center, and OrNda owns 124-bed French Hospital Medical Center.
Tenet also would control three of the five acute-care hospitals and about 93% of the beds in San Luis Obispo County. Tenet owns another hospital in the county, 84-bed Twin Cities Community Hospital in Templeton.
Meanwhile, Tenet's acquisition of OrNda would give it an acute-care monopoly in Monterey Park. The chains own the only two hospitals in the city: Tenet's 206-bed Garfield Medical Center and OrNda's 95-bed Monterey Park Hospital.
However, Monterey Park is in Los Angeles County, a broader geographic area that could be considered part of the same competitive market. And hospitals with fewer than 100 beds generally are immune from federal antitrust scrutiny under the government's 1994 antitrust enforcement guidelines for healthcare providers.
The other markets-Los Angeles, San Diego, Houston and Fort Lauderdale-are large urban areas in which too many hospitals compete to create any obvious antitrust problems for Tenet and OrNda.