In July 2009 the Federal Trade Commission (FTC) filed an administrative complaint against Carilion Clinic for its 2008 acquisition of an outpatient imaging centre, the Centre for Advanced Imaging, and an outpatient surgical centre, the Centre for Surgical Excellence, in Roanoke, Virginia.
According to the complaint, the transaction reduced competition in outpatient imaging and surgical services from three to two competitors, with HCA and Carilion remaining as the only two competitors in the relevant geographic market. On October 7 2009 Carilion agreed to settle the matter by divesting the two facilities to an FTC-approved acquirer.
The complaint defined the product markets as advanced outpatient imaging services, which include provision of MRI and computerized tomographic imaging, and outpatient surgical services, which are a group of surgical services that do not require an overnight hospital stay. The complaint alleged a relevant geographic market as the counties and cities of Roanoke and Salem, Virginia - a 15-mile to 20-mile radius, or a 30-minute drive.
Prior to the August 2008 acquisition, the two centres were the only independent, non-hospital-owned outpatient facilities in the Roanoke area. Carilion and HCA were the only two other providers of outpatient surgical and imaging services in the relevant area. Before the acquisition, health plans could use Carilion or HCA as alternatives to the two centres in their networks, which in turn forced the centres to offer lower rates to insurers. The complaint alleged that the centres were effective competitors to Carilion and HCA on more than price - these independents pushed Carilion and HCA to offer better-quality services and were more accessible to end users. Finally, the FTC alleged that after the transaction, when Carilion converted the two centres to the Carilion fee schedule for services, the rates for services offered pre-acquisition at the centres would increase by as much as 900%.
The FTC's proposed consent order, entered on October 7 2009, requires Carilion to divest the facilities within three months of the order being final. This case is yet another example of a post-closing investigation of an acquisition which led to a challenge by the FTC. Parties should be aware that simply because a transaction does not meet the applicable Hart-Scott-Rodino reporting requirements, it will not necessarily go unnoticed at the agencies.
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