The controversial 1997 merger between the two largest hospitals in Grand Rapids, Mich., has failed to deliver promised cost savings and efficiencies, according to a postmortem on the merger by two former Federal Trade Commission officials.
The 23-page report was prepared as part of the FTC's "look back" program, in which it re-examines its decisions to challenge or approve transactions that may pose anticompetitive risks. However, the unreleased report is not an official FTC document and bears no legal weight.
Modern Healthcare obtained a copy of the report last week.
The report focuses on the merger between 332-bed Blodgett Memorial Medical Center and 529-bed Butterworth Hospital to form Spectrum Health. The hospitals announced their intention to merge in 1995. The FTC challenged the merger on antitrust grounds in 1996 but lost its case in both federal district and appellate courts.
However, the district court judge in the case required the hospitals to sign a consent decree incorporating the terms of their "community commitment," including a promise to achieve $68.5 million in operating efficiencies over the first five years of the merger.
But the report said the hospitals are falling well short of that goal. In fact, the hospitals generated only $30 million in operating efficiencies through 2000.
The hospitals' antitrust lawyer, William Kopit of Epstein, Becker & Green in Washington, dismissed the report as sour grapes on the part of the FTC.
"They lost," he said.
One of the report's authors, private-practice lawyer David Balto, is a former assistant director of policy and evaluation for the FTC's Bureau of Competition. Balto was part of the team that worked on the Grand Rapids case for the FTC.
Balto defended the credibility of the report, saying it's important for the bureau to test the assumptions that courts have used in reaching merger decisions.