ProMedica-St. Luke’s merger hits roadblock

Judge upholds FTC ruling; firm to appeal

12/6/2011

An administrative law judge has ruled in favor of the Federal Trade Commission, agreeing that St. Luke’s Hospital’s partnership last year with ProMedica is anti-competitive, the hospitals were notified late Monday.

The judge’s decision, however, will be appealed to the commission, ProMedica said in a statement Monday. St. Luke’s, it said, will remain part of ProMedica through the appeals process.

ProMedica said in its statement that the judge’s decision was disappointing but not surprising. If the commission does not side with ProMedica in the next step, the company can take its appeal to the 6th Circuit Court of Appeals in Cincinnati.

“We remain completely committed to this partnership and believe it is the right thing to do for the community,” the statement said.

Details of the ruling were unavailable late Monday, and both an FTC spokesman and hospital officials said they had no other information to release.

Lawyers for the FTC have argued that, if the partnership forged last year is allowed, hospital rates could rise more than 56 percent at St. Luke’s and nearly 11 percent at other ProMedica hospitals. Divestiture to an approved acquirer within six months of winning their case is the remedy FTC lawyers want, according to documents filed as part of an FTC administrative trial in Washington.

ProMedica has maintained the partnership is not anti-competitive, and it argued that the economic model an FTC expert used to derive hospital price increases was flawed.

ProMedica officials, however, proposed having a separate team negotiate insurer contracts for the Maumee hospital in hopes of easing regulatory fears.

That approach would have been similar to a relationship the FTC used a few years ago to settle its case with Evanston Northwestern Healthcare Corp. in Illinois, where Highland Park Hospital has a separate insurer-negotiating team from Evanston and Glenbrook hospitals.

Both sides argued their case before the administrative law judge during an eight-week trial held sporadically over the summer.

Roughly 1½ years ago, regulators began to look into ProMedica’s merger with St. Luke’s. In March, the FTC received a preliminary injunction in U.S. District Court in Toledo that prevented the partners from fully joining.

While the anti-competitive question is being settled, ProMedica cannot reduce staffing or clinical services at St. Luke’s. The FTC has allowed the partners to make some joint moves, such as moving rehabilitation beds from St. Luke’s to Sylvania’s Flower Hospital to free some space in the Maumee hospital.

According to its Web site, ProMedica employs 14,000 people at 11 member and affiliate hospitals in northwest Ohio and southeast Michigan, including St. Luke’s.

Contact Julie M. McKinnon at: jmckinnon@theblade.com or 419-724-6087.