## Facts

- The United States, through the Department of Justice Antitrust Division, sought to enjoin a proposed merger between Long Island Jewish Medical Center (LIJ) and North Shore Health System, Inc. (NSHS), two large nonprofit teaching hospitals located about two miles apart in Nassau/Queens, New York.
- The government challenged the merger under § 7 of the Clayton Act, alleging it would substantially lessen competition in acute inpatient hospital services and allow post-merger price increases.
- The case arose amid increasing managed-care contracting and changes in hospital competition, including New York’s deregulation of hospital rates effective January 1, 1997.
- After expedited discovery, the court held a 13-day bench trial with extensive witness testimony and documentary evidence.
- The government’s theory focused on a narrow set of “anchor hospitals” that managed care plans allegedly needed for effective networks, asserting the merger would create dominant bargaining power.
- Defendants contended that managed care organizations had meaningful alternatives; the relevant market was broader; the merger would produce merger-specific efficiencies; and the hospitals’ nonprofit missions reduced incentives for supracompetitive pricing.

## Issues

1. What are the relevant product and geographic markets for assessing competitive effects of a hospital merger under Clayton Act § 7?
2. Did the government prove a reasonable probability that the proposed LIJ–NSHS merger would substantially lessen competition through higher prices, reduced output, or diminished quality?
3. What weight, if any, should be given to claimed merger efficiencies and the parties’ nonprofit status in evaluating likely competitive effects?

## Decision

- The court denied the government’s request for a permanent injunction.
- The court rejected the government’s proposed narrow “anchor hospital” product market and defined the product market as general acute inpatient hospital services for commercially insured patients.
- The court defined geographic markets as (1) Queens and Nassau counties for primary/secondary inpatient care and (2) a broader area including Manhattan and Suffolk County for tertiary care.
- The court found the government did not prove a reasonable probability of substantial anticompetitive effects under the properly defined markets.
- The court credited evidence of meaningful competitors, managed care bargaining constraints, and the ability of rivals to reposition or expand services.
- The court found asserted efficiencies to be credible, merger-specific, and likely to benefit consumers, and considered nonprofit status as one factor reducing the likelihood of post-merger consumer harm.

## Legal Principles

- Under Clayton Act § 7, the government must show a reasonable probability that a merger may substantially lessen competition in a properly defined relevant product and geographic market.
- Market definition must reflect commercial realities, including managed-care contracting, hospital substitutability, and patient/payor behavior, rather than a narrow “must-have” subset unsupported by the record.
- Geographic markets may differ by service level; routine inpatient services can be more local, while tertiary services may draw patients and payors from a wider region.
- Evidence that competing hospitals and payors can constrain pricing power can defeat a prediction of unilateral post-merger price increases.
- Merger efficiencies may be relevant where they are merger-specific, likely to be realized, and consistent with a finding that the merger is unlikely to harm consumers.
- Nonprofit status does not immunize conduct under antitrust law but may bear on incentives and likely conduct when assessing probable competitive effects.

## Conclusion

The court refused to block the LIJ–NSHS merger because the government failed to establish a properly supported narrow market or a reasonable probability that the merger would substantially lessen competition; instead, the record showed broader substitutability, meaningful competitive constraints, and credible merger-specific efficiencies.


United States v. Long Island Jewish Med. Ctr., 983 F. Supp. 121 (E.D.N.Y. 1997)