While two Poplar Bluff, Mo., hospitals are testing their commitment to their 2-year-old sales agreement, the Federal Trade Commission will again test its policy of handling antitrust complaints.
The issue is whether the agency will press its pending administrative antitrust complaint against the two hospitals involved or drop it because of last month's resounding court defeat in federal appellate court.
Late last month, a panel of the 8th U.S. Circuit Court of Appeals in St. Louis overturned a lower-court decision granting the FTC's motion for a preliminary injunction blocking the sale.
Despite the loss, the FTC still has a pending antitrust complaint against the hospitals before a federal administrative law judge.
In the complaint, filed last August, the agency alleges that the sale of 186-bed Doctors Regional Medical Center to Tenet Healthcare Corp.-which owns Poplar Bluff's only other private acute-care hospital, 185-bed Lucy Lee Hospital-would violate Section 7 of the Clayton Act. That law bars acquisitions that substantially reduce competition.
Unlike the U.S. Justice Department, which must fight its antitrust cases solely in federal courts the FTC must initially press its cases on two tracks. It seeks injunctions from federal courts to postpone suspect transactions while it argues the merits of its antitrust complaints before an administrative law judge.
Consequently, parties can beat the FTC in court but still face an administrative case-a system that many antitrust defense lawyers call unfair.
"It's pigheaded and lacks proportionality," said healthcare antitrust lawyer Thomas Campbell in the Chicago office of Gardner, Carton & Douglas. "How many years do you litigate a case like this?"
Such criticism led to a significant policy change by the FTC in 1995. Before that, the FTC automatically pressed its administrative antitrust complaint against merging companies after losing in court. Under the new policy, which applies to all companies in all industries, the FTC decides on a case-by-case basis whether to proceed with an administrative complaint after an adverse court decision.
"There were concerns from providers that we were unfairly given a second bite at the apple," explained Debra Valentine, FTC general counsel. Valentine said the new policy is good government.
In healthcare, the new policy was first tested by the FTC's antitrust challenge of the proposed merger of the two largest hospitals in Grand Rapids, Mich., Blodgett Memorial Medical Center and Butterworth Hospital.
In that case, the FTC failed at both the federal district and appellate court levels to obtain an injunction to block the merger. Shortly thereafter, the FTC dropped its administrative complaint against the deal, which then closed.
"Losing twice gives you ample opportunity for rich reflection," Valentine said.
The FTC might also have rethought its policies because of Sen. Spencer Abraham (R-Mich.), who threatened to cut the budget for the FTC's administrative law process. Detroit healthcare antitrust lawyer David Ettinger, with Honigman, Miller, Schwartz & Cohen, said the commissioners didn't want a political fight, so they acquiesced.
In the Poplar Bluff case, Valentine said, the decision to proceed will be tougher than in the Michigan case: "We won one and lost one here. It makes the decision to pursue the administrative law process more interesting and complicated."
The FTC also must decide whether to ask the full 8th Circuit to reconsider the three-judge panel's decision or appeal the decision to the U.S. Supreme Court.
But without any pressing legal issue, experts said, the Supreme Court is not likely to take the case.