The Federal Trade Commission and the nation's second-largest hospital chain are awaiting a judge's ruling after wrapping up a weeklong hearing on the agency's action to block the proposed merger of the only two private, acute-care hospitals in Poplar Bluff, Mo.
U.S. District Judge Catherine Perry will decide whether the FTC should receive the preliminary injunction it seeks to stall the deal between 187-bed Doctors Regional Medical Center and 185-bed Lucy Lee Hospital. Both sides said a decision is expected soon but declined to be more specific.
Tenet Healthcare Corp., the Santa Barbara, Calif.-based hospital chain that owns Lucy Lee, announced in April 1997 its intention to purchase Doctors Regional, a for-profit owned by a group 30 local physicians. The purchase price was not disclosed.
The hospitals said their merger would improve and add services and eliminate unused beds.
But in its complaint filed April 27 in U.S. District Court in Cape Girardeau, Mo., the FTC alleged that the merger would create a virtual monopoly controlling nearly 78% of the market for acute-care services in and around Poplar Bluff and surrounding Butler County. Tenet then would have the power to raise prices, the FTC said.
Each side had 14 hours to argue its case at the hearing, which lasted from June 22 to June 26.
The FTC appears to have a stronger case in Poplar Bluff than in its recent defeats in Dubuque, Iowa, and Grand Rapids, Mich.
First, each hospital has identified the other as its primary competitor, according to an FTC memorandum to the court.
Second, the FTC's case is supported by the main buyers of healthcare services in Poplar Bluff -- employers and health plans.
In fact, the "overwhelming concern" from payers and employers exceeds reactions in either the Dubuque or Grand Rapids cases, said Robert Leibenluft, assistant director of the FTC's Bureau of Competition.
At the hearing, three health plan officials and six representatives of local employers testified for the FTC and against the merger. Another witness was Lawrence Wu, an economics expert from the National Economic Research Administration in White Plains, N.Y. Wu testified that residents of Poplar Bluff were highly likely to stay in town for services available there. If services were available or a case was complicated, people would go to St. Louis or Cape Girardeau, but they would be charged more, he said.
Tenet and Doctors Regional called a total of eight witnesses, including their own economic expert, Barry Harris of the Washington-based firm Economists Inc., a veteran of the Dubuque case.
Two physician owners of Doctors Regional also testified for Tenet. One of the physicians stands to make $1 million on a $70,000 investment in the hospital, while the other physician would multiply his $40,000 investment tenfold, Leibenluft said.
Tenet's antitrust attorney, Charles James in the Washington office of Jones Day Reavis & Pogue, declined to talk about specific arguments and testimony in the case until the judge makes her ruling.
Also buttressing the FTC's case is the fact that Missouri Attorney General Jay Nixon sided with the agency and joined its case as a plaintiff. Nixon had rejected an offer from the hospitals to freeze prices for a set number of years.
"That was very important to demonstrate that this wasn't just the federal government coming in and saying this (was wrong)," Leibenluft said.
One of the arguments at the hearing revolved around geographic market, which the FTC defined as the area where about 90% of the patients of the two hospitals live. That area includes Butler County and parts of seven surrounding counties, or roughly 30 ZIP codes.
If Judge Perry grants the FTC its preliminary injunction, the agency will have 20 days to file its formal administrative complaint. If she denies the motion, the hospitals will be allowed to merge, and the FTC may choose to appeal.