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FTC attempting to block Cabell Huntington-St. Mary’s merger

HUNTINGTON, W.Va. — The Federal Trade Commission has authorized action to block the merger of two hospitals located approximately three miles apart in Huntington.

The Commission issued an administrative complaint alleging that Cabell Huntington Hospital’s proposed acquisition of St. Mary’s Medical Center would create a dominant firm with a near monopoly over general acute care inpatient hospital services and outpatient surgical services in the surrounding area, which includes Cabell, Wayne, and Lincoln counties in West Virginia and Lawrence County, Ohio.

“If this proposed acquisition goes forward, it would eliminate important competition that has yielded tremendous benefits for Huntington-area residents,” said Steve Weissman, Deputy Director of the FTC’s Bureau of Competition. “The merged hospitals would have a market share of more than 75%, and local employers and residents are likely to face higher prices and reduced quality and service at the combined hospital.”

Cabell Huntington President and CEO Kevin Fowler disagreed with the decision.

“It is our opinion that the FTC’s action announced today misreads the highly competitive landscape in our Tri-State region and overlooks the enormous community benefits that would result from the combination of CHH and SMMC,” Fowler said in a statement. “Despite the FTC’s decision, we remain committed to this acquisition as we believe it assures quality medical care for the residents of our region.”

The complaint alleges that the two hospitals are each other’s closest competitor for health plans and patients, and that the acquisition would substantially lessen competition. This fear is based off previous instances in which the parties have attempted to limit their intense head-to-head competition through collusive conduct, such as restrictive marketing agreements.

The proposed merger was announced in November 2014 when representatives from St. Mary’s indicated that due to the costs of healthcare reform and the decision of the Pallottine Missionary Sisters to end their sponsorship of the hospital after 90 years, they were looking for a new direction.

The combination of 303 bed Cabell Huntington and 393 bed St. Mary’s would create the second-largest hospital chain behind Charleston Area Medical Center.

Back in July, Attorney General Patrick Morrisey announced an antitrust agreement in which Cabell Huntington promised to follow certain procedures such as keeping St. Mary’s a free-standing, faith-based hospital and not raising rates above a benchmark set by the state Health Care Authority.

However, the FTC believes after the seven-year agreement expires, Huntington-area employers and residents will be subject to the “full harmful effects of a virtual monopoly for hospital services in their community.”

The Commission also authorized staff to seek a temporary restraining order and a preliminary injunction in federal court if, and when, necessary to prevent the parties from consummating the acquisition, and to maintain the status quo pending the administrative proceeding.

However, the action may not be immediately necessary as the merging hospitals are still awaiting approvals from the state Health Care Authority and the Catholic Church before they can close the transaction, which may take months.

The Commission vote to issue the administrative complaint and to authorize staff to seek a temporary restraining order and preliminary injunction in federal court was 4-0.

The administrative trial is scheduled to begin on April 5, 2016.

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