## Facts

- ProMedica Health System, Inc., the largest hospital system in Lucas County, Ohio, acquired St. Luke’s Hospital in 2010 through a merger/affiliation that gave ProMedica majority control.
- Lucas County had four general acute-care hospital systems; ProMedica was the dominant provider before the transaction.
- Post-merger, ProMedica’s share exceeded 50% for primary and secondary general acute-care services and exceeded 80% for obstetrical services.
- Commercial insurers (covering about 29% of county patients) negotiated reimbursement rates with hospital systems; the FTC alleged the transaction would increase ProMedica’s ability to raise commercial rates.
- ProMedica’s pre-merger prices were among the highest in Ohio; St. Luke’s had comparatively low rates that did not cover its patient-care costs and had generally better quality ratings than ProMedica.
- The FTC challenged the consummated merger under § 7 of the Clayton Act; after a lengthy administrative hearing, an ALJ ordered divestiture, and the FTC Commission affirmed and issued a final divestiture order.
- ProMedica petitioned for judicial review of the FTC’s final order.

## Issues

1. Whether the FTC properly defined the relevant product markets (primary services, secondary services, and obstetrical services) and the relevant geographic market (Lucas County).
2. Whether market shares and concentration evidence supported a prima facie finding that the merger likely would substantially lessen competition under § 7 of the Clayton Act.
3. Whether ProMedica rebutted the prima facie case through evidence of entry/expansion, efficiencies, or failing-firm/weakened-competitor defenses.
4. Whether divestiture was a lawful and appropriate remedy for the anticompetitive effects found.

## Decision

- The court denied ProMedica’s petition for review and upheld the FTC’s final order requiring divestiture of St. Luke’s.
- The court affirmed the FTC’s product-market segmentation and Lucas County geographic market based on evidence of local competition and insurer contracting realities.
- The court held that high post-merger market shares and concentration measures supported a strong inference of likely anticompetitive effects.
- The court agreed that the merger would likely increase ProMedica’s bargaining power with commercial insurers and enable higher prices.
- The court held that ProMedica failed to rebut the prima facie case: claimed efficiencies were not shown to be merger-specific or sufficient; timely, likely, and sufficient entry/expansion was unlikely; and the failing-firm/weakened-competitor defense was not established.
- The court upheld divestiture as a reasonable remedy, rejecting arguments that a conduct remedy was required.

## Legal Principles

- A § 7 Clayton Act challenge may be established through a prima facie showing based on market definition and structural evidence of undue concentration and increased market shares, supporting an inference of likely harm to competition.
- Hospital-merger analysis may use service-line product markets where evidence supports distinct competitive conditions for categories of inpatient services (e.g., primary, secondary, obstetrical).
- Geographic market definition may properly focus on the area where insurers can realistically turn for alternative hospitals when contracting, informed by patient flows and local contracting patterns.
- Efficiencies evidence must be substantiated and merger-specific and, in a highly concentrated market, may be insufficient to overcome strong structural evidence of likely anticompetitive effects.
- The failing-firm defense requires a stringent showing, including that the acquired firm faces imminent failure and that no less anticompetitive alternative purchaser or partner is available.
- Courts review FTC factual and predictive findings under a substantial-evidence standard and generally defer to supported agency determinations.
- Divestiture is a permissible remedy to restore pre-merger competitive structure when a consummated merger is found likely to substantially lessen competition.

## Conclusion

The Sixth Circuit sustained the FTC’s finding that ProMedica’s acquisition of St. Luke’s likely would substantially lessen competition in Lucas County hospital markets and affirmed divestiture as an appropriate remedy based on strong structural evidence and unrebutted predictions of increased post-merger pricing power.


ProMedica Health Sys., Inc. v. Fed. Trade Comm'n, 749 F.3d 559 (6th Cir. 2014)