As expected, the Federal Trade Commission has asked the full 8th U.S. Circuit Court of Appeals in St. Louis to rehear the closely watched Poplar Bluff, Mo., hospital antitrust case.
In its 15-page petition, filed Sept. 2, the FTC said a three-judge panel of the 8th Circuit erred in July, when it overturned a lower-court decision that said consolidating the only two private acute-care hospitals in Poplar Bluff would be anticompetitive.
The FTC's petition said the appeals panel violated a standard rule of appellate law-which holds that to overturn a case, the facts on which the lower court based a decision must have been clearly wrong when it overturned the ruling. The agency said the appellate panel abused judicial discretion.
In a unanimous decision, the panel said the lower court erred by accepting the FTC's market analysis that the for-profit hospitals competed in a narrow geographic market. The panel also said the lower court didn't give enough weight to the economic efficiencies generated by the proposed consolidation (July 26, p. 2).
The hospitals are 185-bed Lucy Lee Hospital and 186-bed Doctors Regional Medical Center.
In a deal first announced in April 1997, Lucy Lee's owner, Santa Barbara, Calif.-based Tenet Healthcare Corp., sought to buy privately held Doctors Regional for $40.5 million and consolidate the two.
A year later, the FTC challenged the sale for violating Section 7 of the Clayton Act, which bars acquisitions that substantially reduce competition or create monopolies.
In July 1998, the U.S. District Court in Cape Girardeau, Mo., granted the FTC's motion for a preliminary injunction to block the deal pending resolution of the agency's administrative antitrust complaint against the hospitals. The three-judge 8th Circuit panel threw out that decision on appeal.
Because of the litigation, the hospitals' original sales agreement has expired, and the facilities are drawing up a new deal.
As for the FTC's rehearing request, "We view this as a predictable decision by the government," said lawyer Charles James with Jones, Day, Reavis & Pogue in Washington, who represents Tenet in the case.
Eleven 8th Circuit judges will decide whether to reconsider the panel's decision. James said he expects the appellate court decision within weeks.
The FTC's rehearing request is a long shot, said John Cusack, a healthcare antitrust lawyer with Gardner, Carton & Douglas in Chicago.
"It's highly unusual for a full appeals court to overturn a unanimous opinion from its own panel," Cusack said. "The government's geographic analysis is very unrealistic. The key is not where patients go, but where they can go. The reality is, people travel for healthcare."
If the appellate court rejects the FTC's rehearing request, the agency can appeal the panel's decision to the U.S. Supreme Court.
The FTC's administrative antitrust complaint is still pending before an administrative law judge>