Never say never.
That's what some antitrust attorneys are saying about a possible consolidation of the country's two largest for-profit hospital chains, Columbia/HCA Healthcare Corp. and Tenet Healthcare Corp.
"The fact that they're No.1 and No. 2 nationwide doesn't matter," said David Ettinger, an antitrust attorney with Honigman, Miller, Schwartz and Cohn in Detroit.
What will matter to federal regulators is how a merger affects competition in local markets.
Columbia and Tenet collectively own 501 hospitals, including specialty facilities, and some of them are in overlapping markets.
Some observers predict that means antitrust clearance won't come easily for Columbia and Tenet if they pursue a deal. Both companies have major holdings in Texas and Florida.
One trouble spot for them could be El Paso, Texas.
El Paso has six acute-care hospitals, not including psychiatric, rehabilitation or military hospitals, according to the American Hospital Association.
Of those six, Columbia owns two, and Tenet owns two. Collectively, they control about 75% of the staffed beds in the city.
"There's too much of an overlap," said John Cusack, an antitrust attorney with Gardner, Carton & Douglas in Chicago.
Nashville-based Columbia owns 342 hospitals in 36 states, and Santa Barbara, Calif.-based Tenet has 130 acute-care hospitals and 29 specialty hospitals in 22 states.
Besides in El Paso, antitrust questions could be raised in New Orleans and South Florida.
In the New Orleans area, the companies own eight of 17 acute-care hospitals, excluding a Department of Veterans Affairs hospital. Their holdings represent roughly 38% of the market's acute-care beds.
In Florida, Columbia and Tenet collectively own at least 27 acute-care and specialty hospitals throughout Broward, Dade and Palm Beach counties. Cusack estimated a merger would give the two companies almost 42% of the acute-care beds in Dade County only.
While competitive boundaries are harder to draw in urban markets, the U.S. Justice Department recently filed suit to block the proposed merger of two hospital systems on Long Island, N.Y. (June 16, p. 2).
But excess market share in specific areas doesn't mean a Columbia-Tenet deal wouldn't be cleared by federal regulators.
"It's likely the plan would be to divest hospitals to make the deal work," Ettinger said.
As they've built their systems, both Columbia and Tenet have had to sell off a handful of hospitals to gain antitrust clearance for some of their major system acquisitions in the past.
Robert Leibenluft, assistant director for healthcare at the Federal Trade Commission, wouldn't comment on the likelihood of a possible merger.
But in mergers, Leibenluft said, the FTC studies local markets and also may look at whether the companies compete on a regional and statewide basis.