Physician Mergers, Acquisitions, and Joint Ventures

A. Introduction
Changes in the regulatory landscape have led to increasing
consolidation among physician groups, as well as acquisitions of
physician practices by hospitals. The passage of the Affordable Care Act
and the costs of compliance along with pressure on reimbursement rates
is only one example of regulation leading to consolidation. Although
consolidation has the potential to improve quality of care, reduce costs
and achieve other efficiencies,1 at the same time it presents the potential
for anticompetitive effects. This Chapter focuses on physician mergers,
acquisitions, and formation of partially integrated networks and the
antitrust risks that may arise under each of these scenarios.
B. Overview of Applicable Antitrust Analysis
The federal antitrust laws apply to acquisitions and mergers of
physician practices just as they do to acquisitions and mergers of other
types of businesses. The principal federal statutes that apply to
acquisitions and mergers are Section 7 of the Clayton Act2 and Section 1
of the Sherman Act.3 There are other federal antitrust laws4 that may
apply to certain physician acquisitions or mergers, although with
considerably less frequency than Section 7 or Section 1. Similarly, there
are state antitrust laws that often apply to physician acquisitions or
(1996) [hereinafter 1996 HEALTH CARE STATEMENTS], available at 007/08/14/0000.pdf;
GUIDELINES (2010) [hereinafter MERGER GUIDE LINES], available at
2. 15 U.S.C. § 18.
3. 15 U.S.C. § 1.
4. See, e.g., Sherman Act, 15 U.S.C. § 2; FTC Act, 15 U.S.C. § 45.
172 Health Care Mergers and Acquisitions Handbook
mergers, but the applicable state antitrust laws typically track and have
the same substantive analysis as federal antitrust laws.5
Relevant Markets for Physician Practice Mergers
In mergers or acquisitions of physician practices, the relevant
product and geographic markets can be difficult to delineate with
certainty. Under the Merger Guidelines,6 a relevant market is defined
as a product or service (or group of products and services) and
corresponding geographic area within which a hypothetical monopolist
could successfully impose a small but significant and non-transitory
price increase. Under the Merger Guidelines, market definition focuses
solely on demand substitution: customers’ ability and willingness to
substitute away from one product to another.7 The Merger Guidelines
consider supply substitution the responsive actions of suppliers to
changes such as a price increase but do so when analyzing market
participants, market shares, competitive effects and entry, not when
defining the market.8 As discussed below, in most physician mergers
relevant product market, and then turns to identification of the relevant
geographic market or markets.
a. Relevant Product Markets
Analyzing the relevant product market for a physician practice
merger or acquisition typically begins by determining the types of
services offered by the physicians involved. Physician services markets
are often defined as either “primary care,” referring to relatively non-
complex services typically provided by family or general practitioners, or
as the distinct services of recognized specialties, such as cardiology.9 The
5. For a description of the antitrust laws in all U.S. states, see AB A SECTION
6. See MERGER GUIDELINES, supra note 1, § 1.0.
7. Id. § 4.
8. Id.
9. See, e.g., CentraCare Health, 2016 WL 5930294, at *3 (FTC 2016) (FTC
complaint defining distinct product markets for adult primary care,
pediatric primary care, and OB/GYN services); Keystone Orthopaedic
Specialists, LLC, 2015 WL 6384952, at *3 (FTC 2015) (FTC complaint
limiting the product market to “the provision of orthopedic physician
services,” which includes “physicians who specialize as o rthopedists to
Physician Mergers, Acquisitions, and Joint Ventures 173
“primary care” category is relatively broad, including physicians who
provide routine medical services and are considered by patients to be
their “regular doctors.” Thus, the “primary care” category may include
family practitioners, general practitioners, and internists as well as
obstetrician/gynecologists and pediatricians. Under certain
circumstances, the relevant product market may be defined to include or
exclude a subset of primary care services, such as the services of
pediatricians.10 In CentraCare Health, however, the FTC defined distinct
product markets for adult primary care, pediatric primary care, and
OB/GYN physician services.11
Although surgeons in different specialties may provide some of the
same services, this does not mean that the services of the physicians are
reasonably substitutable. General surgeons, for example, may perform
some of the same types of surgery as orthopedic surgeons, but their
services on the whole are likely not viewed as interchangeable by health
treat injuries and diseases of the musculoskeletal system”); Morgenstern
v. Wilson, 29 F.3d 1291, 1296 (8th Cir. 1994) (limiting product market to
heart surgery service s); Antitrust Divisio n Business Review Letter from
Anne K. Bingaman, Assistant Att’y Gen., U.S. Dep’t o f Justice, to James
Matthews of Lindquis t & Vennum on behalf o f Itasca Clinic and Gra nd
Rapids Medical Associates (Mar. 19, 1996) [hereinafter Itasca Clinic
Business Review Letter], available at .htm (finding two
different relevant product markets existed for, respectively, primary care
services and general surgical services); see also 1996 HEALTH CARE
STATEMENTS, supra note 1, Statement 8 at 74. See Chapter II for a more
complete discussion of defining relevant product markets.
10. See St. Alphonsus Med. Ctr. - Na mpa v. St. Luke’s Heal th Sys., 2014
U.S. Dist. LEXIS 182869, *17-18 (D. Idaho 2014) (findings of fact and
conclusions of law) (product market limited to adult primary care
services, defined as physicians practicing internal medicine, family
practice, and general practice); aff’d St. Alphonsus Med. Ctr.-Nampa v.
St. Luke’s Health Sys., 778 F.3d 775 (9th Cir. 2015); Antitrust Division
Business Review Lett er from Anne K. Bingama n, Assistant Att’y Gen. ,
U.S. Dep’t of Justice, to Steven J. Kern & Robert J. Conroy of Kern
Augustine Conroy & Schoppman, P.C. on behalf of Children’s
Healthcare, P.A. (Mar. 1, 1996) [hereinafter Children’s Healthcare
Business Review Le tter], available at
public/busreview/0555.htm (finding product market was limited to
pediatricians, excluding other types of primary care physicians even
though they may treat some childre n).
11. 2016 WL 5930294, at *3.

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