LCMC, HCA notch win against feds in acquisition case

A judge ruled Wednesday that LCMC Health’s acquisition of three HCA Healthcare hospitals is exempt from federal pre-merger notification requirements, clearing the way for LCMC to continue integrating the Louisiana hospitals into the system.

New Orleans-based LCMC and Nashville, Tennessee-based HCA sued the Federal Trade Commission and other federal agencies on April 19, seeking a summary judgment that the transaction was exempt from pre-notification requirements implemented under the Hart-Scott Rodino Act. The organizations claimed that they satisfied the necessary regulatory requirements through the state's certificate of public advantage law, which shields the merging parties from federal antitrust scrutiny in exchange for prolonged state oversight. 

Related: LCMC Health files lawsuit against feds over proposed hospital deal

A day later, the FTC sued to stop the $150 million acquisition of Tulane Medical Center, Tulane Lakeside Hospital and Lakeview Regional Medical Center completed in January, claiming that LCMC did not report the deal to federal regulators.

In his ruling Wednesday, United States District Court for the Eastern District of Louisiana Judge Lance Africk granted the health systems’ request for summary judgment, upholding the health systems’ argument that the federal pre-merger notification requirement under Section 7A of the Clayton Act did not apply to the transaction.

Africk cited the 1980 California Retail Liquor Dealers Association v. Midcal Aluminum, Inc. case, which established a two-part test for determining whether merging parties are exempt from federal antitrust laws. Transactions are exempt if the transaction is actively supervised by the state and the supervision is codified as state policy.

“Although the court appreciates that this holding may make enforcement more difficult for the FTC in the narrow context of transactions that close pursuant to state COPAs, parties to such transactions are already incentivized to ensure that their transactions satisfy Midcal’s demands,” the ruling read. 

"We are pleased to announce that the District Court has recognized the value of our partnership with Tulane University and upheld the State of Louisiana's approval,” said LCMC Health CEO Greg Feirn in a news release.

The FTC declined to comment. HCA did not immediately respond to requests for comment.

Typically, the FTC sues to block proposed hospital transactions prior to closing, if the agency determines that they could lead to anticompetitive activity, such as excessive price increases for healthcare services. For instance, in June 2022 the commission intervened in two separate proposed acquisitions involving HCA and Dallas-based Steward Health, as well as West Orange, New Jersey-based RWJBarnabas Health and St. Peter's Healthcare System in New Brunswick, New Jersey. The health systems involved walked away from their proposed acquisitions amid the FTC’s opposition.

The FTC has continued to lobby against certificates of public advantage, claiming that states are not equipped to oversee hospital mergers. While hospital executives and state officials say that mergers under COPAs will lead to lower costs and better outcomes, the FTC issued a report in August 2022 claiming that some transactions have produced the opposite results.