Last week's federal appellate ruling that ProMedica must unwind its 2010 acquisition of a suburban Ohio hospital is a setback for hospitals that argue they need to merge because they are financially weakened, legal experts say.
A three-judge panel of the 6th U.S. Circuit Court of Appeals in Cincinnati held that the Federal Trade Commission correctly decided that Toledo-based not-for-profit ProMedica was likely to increase prices after buying suburban St. Luke's Hospital in Maumee. The court rejected the so-called “weakened-firm” defense of the deal. Under that theory, a deal should be allowed to stand if it's the only way to keep a financially struggling hospital afloat, even if it might otherwise violate antitrust laws.
But evidence presented in the case showed that St. Luke's had enough cash reserves before the deal to pay its obligations and that its market share was on the rise, according to Judge Raymond Kethledge, who wrote the opinion. He called ProMedica's and St. Luke's weakened-firm argument “the Hail-Mary pass of presumptively doomed mergers—in this case thrown from ProMedica's own end zone.”