UNIVERSITY PARK, Pa. – A Penn State Law professor, a State College attorney, and a recent Penn State Law graduate—who was a student when the piece was published—co-authored an article in the current issue of The Pennsylvania Bar Association Quarterly.
“Antitrust Analysis of Pennsylvania Hospital Mergers and the Efficiency Defense” by Professor of Law Samuel C. Thompson Jr., his wife, attorney Becky Thompson, and 2018 Penn State Law graduate Theresa DeAngelis appears in Volume LXXXIX, No. 2, of the journal.
The article offers an introduction to antitrust merger enforcement under Section 7 of the Clayton Act through the lens of the application of the government’s merger guidelines to two hospital mergers in Central Pennsylvania, one abandoned after being challenged by the FTC and one consummated.
The authors first look at the proposed acquisition by the Penn State Milton S. Hershey Medical Center of Pinnacle Health System, which was abandoned after the U.S. Court of Appeals for the Third Circuit enjoined the merger as a potential violation of Section 7 of the Clayton Act, which prohibits mergers that create monopolies or significantly reduce competition. They also examine the completed merger between Pinnacle and the University of Pittsburgh Medical Center, which was consummated less than a year after the Hershey-Pinnacle merger was abandoned.
In five sections, the authors also provide:
- background information on the recent hospital M&A landscape in Pennsylvania,
- an introduction to the substantive antitrust laws governing mergers and acquisitions,
- analysis of the efficiencies defense and its apparent requirement that efficiencies benefits be passed on to consumers,
- an illustration of how the Justice Department’s 1984 Non-Horizontal Merger Guidelines were likely applied to the UPMC-Pinnacle merger, and
- an analysis of the passing-on requirement of the efficiencies defense in both competitive and monopoly markets, with and without efficiencies.
They argue that the Hershey-Pinnacle merger was a horizontal merger involving direct competitors and was therefore subject to scrutiny under the 2010 Horizontal Merger Guidelines of the DOJ and Federal Trade Commission. Further, they contend that the UPMC-Pinnacle merger had aspects that were both conglomerate (i.e., market extension) and vertical (i.e., UPMC Health Plans-Pinnacle/UPMC Hospitals) and therefore presented issues under the principles set out in the DOJ’s, Non-Horizontal Merger Guidelines.
“It is our strong judgment that the FTC, the office of the Pennsylvania Attorney General, and the Third Circuit reached the correct decision in the Hershey-Pinnacle merger,” they conclude, “and the FTC and the Pennsylvania Attorney General made the correct decision in not challenging the UPMC-Pinnacle merger.”
Samuel C. Thompson Jr. is the Arthur Weiss Distinguished Faculty Scholar and director of the Center for the Study of Mergers and Acquisitions at Penn State Law. Becky Thompson, a 2012 graduate of Penn State Law, is an attorney in private practice in State College and a member of the Penn State Law Trial Advocacy faculty. DeAngelis graduated from Penn State in 2018 with a J.D. from Penn State Law and an M.H.A. from the College of Health and Human Development.