The Federal Trade Commission delivered a double whammy to the proposed merger of Grand Rapids, Mich.'s largest hospitals last week.
As expected, the commission voted to appeal a federal district court's denial of a preliminary injunction to block the joining of Blodgett Memorial Medical Center and Butterworth Hospital.
It also filed an administrative complaint, entailing a trial before an administrative law judge. That new wrinkle surprised the hospitals.
Blodgett Vice President and Chief Operating Officer Bruce Hagen said the case was sufficiently tried in April before U.S. District Judge David McKeague in Lansing, Mich. McKeague denied the FTC's request for a preliminary injunction Sept. 26.
"To have to replay that entire scenario for an administrative law judge within the FTC process is a very disappointing scenario," Hagen said.
He added, "I think it's an indication that the FTC is pursuing every avenue it has to challenge the merger."
Some believed the FTC would relax its merger enforcement because of a June 1995 announcement that it would consider on a case-by-case basis whether to file an administrative complaint following the denial of a preliminary injunction. Previously, administrative actions were filed routinely.
The FTC did not disclose why it decided to pursue an administrative remedy in this case.
The hospitals were the first to be offered the FTC's new fast-track procedure, which is supposed to resolve administrative complaints within 13 months.
But the hospitals declined. They will instead try to postpone the administrative process until the appellate ruling, Hagen said. The hospitals hope the FTC will drop the administrative complaint if two federal courts have ruled for the hospitals.
McKeague ruled that the FTC proved its case that the merger would violate Section 7 of the Clayton Act, but he said the merged organization probably wouldn't use its market power to raise prices because its board would consist of community representatives.
However, McKeague required the hospitals to sign a consent decree limiting price increases for seven years.
The hospitals agreed not to proceed with the merger until the federal appeal is resolved.