Rockford Rerun: FTC Sues To Stop Hospital Merger In Rockford, Illinois

It was a hit for the government the first time, in the 1980s. Returning to a market where the government successfully challenged a hospital merger over twenty years ago, the Federal Trade Commission ("FTC") filed a complaint in U.S. District Court on November 18, 2011 seeking a temporary restraining order and preliminary injunction regarding OSF Healthcare System's ("OSF") proposed acquisition of Rockford Health System ("Rockford"). The FTC staff also filed an administrative complaint within the agency.

There are three major general acute-care hospital systems in the Rockford, Illinois region: OSF, Rockford, and SwedishAmerican Heath System ("SwedishAmerican"). In 1989, the United States Department of Justice Antitrust Division successfully challenged a proposed merger between Rockford and SwedishAmerican. United States v. Rockford Mem'l, 717 F. Supp. 1251, aff'd, 898 F.2d 1278 (7th Cir. 1990).

While the antitrust enforcement agency has changed here, and the merging hospitals have switched, the FTC alleges that this case is fundamentally a rerun of the earlier Rockford case:

In the 1989 case, the District Court defined a relevant geographic market identical to the market alleged in this Complaint. The District Court also defined a relevant product market, general acute-care hospital inpatient services, identical to a market alleged in this Complaint. In fact, the District Court described a market structure, levels of market concentration, and entry conditions in the earlier case that are strikingly similar to those alleged in this Complaint, and, on that basis, concluded that the merger of two Rockford hospitals would 'produce a firm controlling an undue percentage share of the relevant market, thus increasing the likelihood of market dominance by the merged entity or collusion.'

The new complaint alleges that the merged hospital system would control 64% of the general acute-care inpatient services market, and that, post-merger, the two remaining firms would control 99.5% of the general acute-care inpatient services market.

There are, however, several new twists to the 21st century version of the Rockford story. First, the FTC also alleges that the acquisition threatens substantial competitive harm in the market for primary care physician services provided to commercially insured adults. The FTC defines this market to include physicians specializing in internal medicine, family practice, and general practice, but does not include...