## Facts

- The United States sued Mercy Health Services (Mercy Health Center) and Finley Tri-States Health Group, Inc. (Finley Hospital) to enjoin their planned combination of hospital operations in Dubuque, Iowa.
- Mercy and Finley were the only two general acute-care hospitals in Dubuque; Mercy was substantially larger than Finley by beds and inpatient discharges.
- The hospitals agreed to form a jointly owned entity, Dubuque Regional Health Services (DRHS), which the parties treated as a merger for antitrust purposes.
- The government sought permanent injunctive relief, alleging the merger would substantially lessen competition in general acute-care inpatient hospital services.
- The parties waived a preliminary-injunction hearing and proceeded to an expedited bench trial on the request for a permanent injunction.
- The government’s theory depended on a geographic market limited essentially to Dubuque (or Dubuque County), asserting that patients typically obtain inpatient services locally and that the merger would create extreme concentration.
- Defendants contended the geographic market was broader because insurers and managed-care organizations contract regionally and can steer patients to hospitals outside Dubuque, constraining pricing by the merged system.

## Issues

1. Whether the United States proved a relevant geographic market for general acute-care inpatient hospital services limited essentially to Dubuque (or Dubuque County).
2. Whether, in the properly defined market, the proposed merger was likely to substantially lessen competition under § 7 of the Clayton Act.
3. Whether the arrangement constituted an unreasonable restraint of trade under § 1 of the Sherman Act.

## Decision

- The court denied the United States’ request for a permanent injunction.
- The court held the government failed to prove a geographic market as narrow as Dubuque (or Dubuque County) because purchasers had practical alternatives beyond the city through managed-care contracting and steering.
- Because the geographic market was broader than the government alleged, the government did not carry its burden to show the merger was likely to substantially lessen competition.
- The § 1 Sherman Act claim failed for substantially the same reasons as the § 7 claim.

## Legal Principles

- A § 7 Clayton Act merger challenge requires defining relevant product and geographic markets and assessing likely competitive effects within those markets.
- The relevant geographic market turns on where purchasers can practically turn for alternatives in response to a price increase, not merely on political boundaries or historical patient-origin patterns.
- High market shares and concentration measures in a narrowly drawn market do not establish illegality if the market definition does not reflect competitive constraints faced by purchasers.
- In hospital markets, evidence that managed-care payers can redirect demand through provider networks and benefit design may support a broader geographic market and reduce an inference of durable market power.
- When market definition and competitive-effects proof fail under § 7, parallel § 1 claims based on the same alleged market power and restraints ordinarily fail on the same factual and economic record.

## Conclusion

The court refused to block the Mercy–Finley combination because the government did not prove a Dubuque-only geographic market or that the merger, evaluated in a broader market shaped by managed-care purchasing and steering, was likely to produce a substantial lessening of competition.


United States v. Mercy Health Servs., 902 F. Supp. 968 (N.D. Iowa 1995)