## Facts

- Hospital Corporation of America (HCA) acquired Hospital Affiliates International, Inc. and Health Care Corporation in 1981–82 in transactions valued at about $700 million.
- Before the acquisitions, HCA owned one acute-care hospital in the Chattanooga, Tennessee area; afterwards it owned two additional Chattanooga hospitals and held four-year management contracts for two more Chattanooga-area hospitals.
- After the acquisitions, HCA owned or managed 5 of the 11 hospitals in the area.
- Treating the hospitals brought under common ownership or control as a single entity, evidence showed HCA’s market share increased from about 14% to 26%, and the four-firm concentration ratio increased from about 79% to 91%.
- The record described local market conditions (including a cooperative tradition among hospitals) indicating a market prone to coordinated conduct.
- HCA argued that hospital differentiation and sophisticated third-party payors (insurers) made coordinated effects unlikely.
- After the FTC investigation began, one management contract was canceled; HCA argued this post-acquisition event undermined the FTC’s theory.
- The FTC found a § 7 Clayton Act violation (also proceeding under § 5 of the FTC Act), ordered divestiture of the acquired Chattanooga hospitals, and imposed an advance-notice requirement for certain future acquisitions; HCA petitioned for review.

## Issues

1. Whether substantial evidence supported the FTC’s finding that the acquisitions were likely substantially to lessen competition in acute-care hospital services in the Chattanooga area in violation of § 7 of the Clayton Act.
2. Whether the FTC improperly discounted post-acquisition evidence that one management contract was later canceled.
3. Whether the FTC lacked constitutional authority to enforce § 7 in this matter.
4. Whether the FTC’s remedies, including divestiture and an advance-notice requirement for certain future acquisitions, were within the agency’s remedial discretion.

## Decision

- The court denied HCA’s petition and upheld the FTC’s decision and order in full.
- The court held the FTC’s § 7 violation finding was supported by substantial evidence, including market definition and concentration evidence.
- The court affirmed the divestiture order.
- The court upheld the advance-notice requirement as reasonable and within the FTC’s discretion to prevent recurrence.
- The court rejected the constitutional challenge as inadequately presented and did not reach its merits.

## Legal Principles

- In a properly defined relevant market, a material increase in concentration in an already highly concentrated market can establish a strong prima facie case of likely competitive harm under § 7.
- Post-acquisition evidence is entitled to little or no weight when it is subject to manipulation by the party offering it, particularly when the change occurs after enforcement scrutiny begins.
- Evidence beyond market shares and concentration, including features indicating susceptibility to coordinated conduct, can support a § 7 finding.
- The FTC has broad remedial discretion in merger cases; forward-looking, prophylactic provisions (including advance-notice requirements for future transactions) may be sustained when reasonably tailored to prevent similar violations.

## Conclusion

The Seventh Circuit affirmed the FTC’s determination that HCA’s Chattanooga-area acquisitions were likely to lessen competition substantially, sustained divestiture and an advance-notice remedy, and declined to address a constitutional attack on the FTC that was not adequately developed.


Hosp. Corp. of Am. v. Fed. Trade Comm'n, 807 F.2d 1381 (7th Cir. 1986)