Focusing on economic realities can advance hospital mergers

Hospital executives and even many attorneys frequently misunderstand the antitrust risks raised by hospital mergers and acquisitions. On one hand, until recently some people incorrectly believed that not-for-profit hospital mergers and acquisitions would not be subject to governmental scrutiny. On the other hand, many analyze hospital mergers and acquisitions by applying standard antitrust principles, without considering the unique features of, or recent developments in, the healthcare market. Yet the special characteristics of the hospital industry today can lead to approval of mergers under circumstances that in other industries would likely lead to a court challenge. The investigation by the Federal Trade Commission or the Justice Department's Antitrust Division is pivotal. Governmental investigators are willing to consider the impact of the new economic conditions affecting hospitals. Factors to consider when trying to determine whether a hospital merger or acquisition will raise antitrust concerns are: 1. Market shares of the parties. 2. Factors that relate to market size. 3. Potential for substantial cost savings. 4. Potential for expanding services. 5. Significant weaknesses in one or both hospitals. 6. Presence of strong buyers in the market. 7. Evidence that merging hospitals complement one another. 8. Examples of vigorous competition between hospitals and outpatient facilities. 9. Whether the parties involved must provide advance notice of the transaction to the government.