Not-for-profit status facilitates hospital merger

Not-for-profit status may become an advantage for hospitals seeking to increase market share through a merger. On July 8, 1997, the Court of Appeals for the Sixth Circuit upheld the District Court's denial of a request by the Federal Trade Commission (FTC) to halt a proposed merger between two not-for-profit hospitals, Butterworth Hospital and Blodgett Memorial Medical Center, both in Grand Rapids, Michigan. The FTC had requested the District Court to enjoin the merger until the agency could determine whether it was in violation of Federal antitrust laws. The District Court was persuaded that mergers of not-for-profit hospitals do not generally lead to price increases, and may, in fact, lead to price reductions. Moreover, because the Michigan not-for-profit hospitals' boards included community representatives who were purchasers of the hospitals' services, the court found that "there would be no rational economic incentive for such an organization to raise its prices."