The Federal Trade Commission late last week made a "second request" for information regarding Tenet Healthcare Corp.'s proposed $3.1 billion acquisition of OrNda HealthCorp.
The official query signals that the FTC is conducting a thorough review of the 126-hospital deal for any anticompetitive effects.
The FTC's antitrust investigation is focused on three adjacent counties in California where the two companies own four competing hospitals. The three counties are Monterey, San Luis Obispo and Santa Barbara.
When Santa Barbara-based Tenet unveiled the deal in October, company executives said they anticipated little antitrust interference in the transaction, which would create the nation's second-largest hospital company with about $8.5 billion in annual revenues (Oct. 21, p. 2).
"We will cooperate by responding to the FTC, but we still expect the transaction to close no later than March of 1997," said Christie Sulzbach, Tenet's communications director.
Tenet officials said the FTC did not give them a deadline for the response to its request.
The focus of the FTC investigation suggests that Tenet would have to divest one or more California hospitals to gain antitrust clearance.
A Tenet-OrNda combination would control three of the five hospitals and about 93% of the staffed beds in San Luis Obispo County, nearly 200 miles north of Los Angeles.
The combined company wouldn't own any hospitals in Monterey County, an area just north of San Luis Obispo, but it's considered a source of patients for the other three hospitals.
The companies would own just one hospital in Santa Barbara County, which is just south of San Luis Obispo, but the FTC may consider it to be part of the same geographic market.
In Los Angeles County, which wasn't mentioned as a focus of FTC scrutiny, the company would own the only two hospitals in Monterey Park. But the FTC apparently considered the area part of the larger Los Angeles market, watering down any anticompetitive concerns the agency had.
At the time of the merger, Wall Street analysts expressed concern that the companies would have an antitrust problem in south Florida and possibly Texas. The deal would give them 16 hospitals in Florida and 20 in Texas. Like Los Angeles, the FTC apparently considered the markets to be too broad to create any antitrust problems.