FTC Had 'Serious Concerns' With Proposed Mercy, Capella Deal

by Mark Friedman  on Friday, Jun. 28, 2013 4:13 pm  

Mercy Health System in Hot Springs.

The Federal Trade Commission said in a statement Thursday that it was prepared to challenge the proposed sale of Mercy Health's Hot Springs health system to Capella Healthcare of Franklin, Tenn., had the deal moved forward.

On Thursday, Mercy and Capella issued a joint statement that said they were calling off the deal, which was first announced in April 2012. Lynn Britton, Mercy's president and CEO, cited anticipated "continued challenges" as the reason for scuttling the deal.

The FTC's Bureau of Competition said in its statement Thursday that it had been investigating the proposed transaction for months.

"We had informed Capella Healthcare and Mercy Hot Springs that we had serious concerns about the likely anticompetitive harm that would have resulted if the transaction was completed," Richard Feinstein, director of the FTC’s Bureau of Competition, said. "Staff gathered testimonial, documentary, and economic expert evidence that this transaction was anticompetitive and would likely have resulted in higher prices and diminished health care service in Hot Springs."

If the transaction took place, it would have merged Mercy Hospital in Hot Springs with National Park Medical Center under Capella's ownership.

The proposal faced opposition from the start, prompting the resignation of one director on Mercy's national board, Oaklawn Park General Manager Eric Jackson. "I have a strong conviction" that a faith-based, nonprofit hospital is the best hospital for Hot Springs, Jackson said at the time.

Bishop Anthony B. Taylor of the Catholic Diocese of Little Rock also expressed uneasiness about the deal, saying he was concerned about the "negative impact this purchase could have on the medical care available to the poor and on the Hot Springs community in general." The Catholic Church had to approve the deal because of its relationship to Mercy hospitals.

Proponents of the deal said the Mercy system in Hot Springs would have faced layoffs or cuts in services had it continued as part of in the Mercy Health System.

After Arkansas Business reported in January about the FTC investigation and said it put the closing of the transaction on shaky ground, Capella requested a retraction and characterized the FTC's actions as routine. Arkansas Busienss did not retract the report but did publish a "Whispers" item noting Capella's objections.

The FTC's Feinstein said in his statement that the announcement of Mercy and Capella abandoning their plans was "victory for local businesses and patients."

Mercy's spokeswoman, Barb Meyer, declined to comment on the FTC's statement. A Capella spokeswoman said the company had no comment.

The FTC's Full Statement:

Statement of FTC Competition Director Richard Feinstein on Today’s Announcement by Capella Healthcare That it Will Abandon its Plan to Acquire Mercy Hot Springs

Richard Feinstein, Director of the Federal Trade Commission’s Bureau of Competition, issued the following statement today regarding the announcement by Capella Healthcare that it is abandoning its plans to acquire rival Mercy Hot Springs health system in Hot Springs, Arkansas.

"The fact that this acquisition will not proceed is a victory for local businesses and patients, as it will preserve access to low-cost, high-quality healthcare for the citizens of Hot Springs, Arkansas," Feinstein said.

"Staff of the Bureau of Competition had been investigating the proposed transaction for months. We had informed Capella Healthcare and Mercy Hot Springs that we had serious concerns about the likely anticompetitive harm that would have resulted if the transaction was completed, and that we were prepared to challenge the transaction," Feinstein said. "Staff gathered testimonial, documentary, and economic expert evidence that this transaction was anticompetitive and would likely have resulted in higher prices and diminished health care service in Hot Springs."

Capella is a for-profit healthcare system headquartered in Franklin, Tennessee that operates 12 acute care hospitals in communities across six states. Mercy Hot Springs is a not-for-profit Catholic health care system headquartered in St. Louis, Missouri that operates over 30 hospitals and 270 healthcare clinics across seven states.

 

 

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