The U.S. Justice Department gave an antitrust thumbs down to a proposed merger of a dozen gastroenterologists in Allentown, Pa., fearing the deal would reduce competition and result in higher prices for such services.
The department rendered its decision in a business review letter made public last week. The antitrust advisory opinion is noteworthy because the department, along with the Federal Trade Commission, has approved dozens of physician network deals over the past several years while rejecting very few (Jan. 8, 1996, p. 40).
The negative letter is another signal that the Justice Department's antitrust leniency with healthcare providers may be ebbing.
"Based upon materials that you submitted, along with our own independent investigation, the Department of Justice cannot say at this time that it would not take enforcement action against the merger if it is consummated as proposed," wrote acting Assistant Attorney General Joel Klein, head of the antitrust division.
Given that warning, the doctors haven't decided what to do next, said their attorney, Donald Lipson.
"We were disappointed," Lipson said. "We didn't really think that a small group of doctors getting together would really be a problem for the Justice Department."
In his letter, Klein paints the proposed merger as much more than a few doctors joining forces. They make up 92% of the gastroenterologists in Allentown and almost 67% of area gastroenterologists when nearby Bethlehem, Pa., is included.
In defense of the merger, the doctors told the Justice Department that other local physicians and specialists could be considered substitutes for gastroenterologists because they perform many of the same procedures.
But some payers interviewed by the Justice Department said substitutes aren't as good as the real thing. Gastroenterologists also help make health plans more attractive.
"More than one payer expressed the view that the only apparent reason for such a merger is to acquire leverage in prices for gastroenterology services," Klein wrote.
Besides its effect on competition and pricing, the merger appeared to create no new worthwhile efficiencies, the department concluded.