The Affordable Care Act Efficiencies Defense in Section 7 Cases: FTC v. St. Luke's and Antitrust Unicorns

Abstract

in an earlier article commenting on the District Court decision in the FTC vs. St. Luke’s litigation, I pointed out that the court recognized that the acquisition of Saltzer by St. Luke’s was intended to, and would have had the effect of, improving patient outcomes. The court still blocked the acquisition, however, because it found that there might have been other ways to achieve those improved outcomes and that since St. Luke’s had not proven that the acquisition path was the only viable one, it had not chosen the least restrictive alternative. Therefore, St. Luke’s had not rebutted the government’s prima facie case based on the market share of the proposed merged entity.The Court of Appeals affirmed, stating that while the parties and the court believed that the merger was intended—and indeed would have led to — better patient outcomes, the District Court had correctly found that the huge market share of the post-merger entity created a substantial risk of anticompetitive price increases and that the offered efficiencies were not an adequate defense.Two rather provocative issues for health care mergers come out of the decisions in this case: (1) The policies and intent of the Affordable Care Act seem to have no effect on the antitrust analysis to be applied in these cases: and (2) High post-merger market shares/HHIs create a presumption of harm that cannot be rebutted except by the nearly impossible task of proving a negative (that there is no less restrictive way to achieve the better patient outcomes). The prima facie case has become close to irrebuttable.