Introduction to Hospital Mergers

• Pages: 1-15

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CHAPTER I

INTRODUCTION TO HOSPITAL MERGERS

A. Introduction

This chapter provides a brief, non-technical introduction to hospital

merger challenges in the United States. It includes a general description

of certain trends in hospital merger litigation and introduces methods of

analysis and arguments utilized in the antitrust assessment of hospital

combinations. The main goal of the chapter is to offer readers a broad

analytical overview; subsequent chapters provide an in-depth look at

specific issues that have arisen in hospital merger review.

B. History of Hospit al Merger Litigation

Over the past three decades, the hospital industry has seen substantial

consolidation and a great deal of merger litigation. The 1990s marked a

tumultuous period of restructuring among firms in the U.S. health care

sector. In an effort to streamline operations, providers and payors

reorganized both themselves and their relationships with patients. The

growing presence of managed care placed enormous pressure on

hospitals to reduce excess capacity and costs, while improving the

quality of patient care. The result was a period of rapid and substantial

consolidation. After a brief lull during the first decade of this century, the

consolidation trend has continued as physician groups, health plans, and

hospital systems, spurred in part by health care reform, have continued to

seek ways to contain costs, shore up market positions, and achieve

improvements in care.1

Over the years, hospital consolidation frequently has clashed with

Section 7 of the Clayton Act’s prohibition on mergers that result in a

“substantial lessening of competition.” Since the mid-1980s, enforcers

have litigated against 17 hospital mergers under Section 7, with a number

of other matters either settling or being abandoned after a complaint was

1. See, e.g., Leemore Dafny, Hospital Industry Consolidation – Still More

To Come?, 370 N. ENG. J. MED. 198 (2014); Rich Daly, Hosp ital

Consolidation Trend To Continue, HEALTHCARE FIN. MGMT. ASS’N

HEALTHCARE BUS. NE WS, June 16, 2014; Helen Adamopoulos, 10 Key

Healthcare Transaction Trends, BECKER’S HOSP. REVIEW, Feb. 7, 2014.