9510126
B208846
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
__________________________________________
)
In the Matter of )
)
Butterworth Health Corporation, )
a corporation, )
)
and )
)
Blodgett Memorial Medical Center, )
a corporation. ) Docket No. 9283
__________________________________________)
COMPLAINT
Pursuant to the provisions of the Federal Trade Commission
Act, and by virtue of the authority vested in it by said Act, the
Federal Trade Commission, having reason to believe that
respondents Butterworth Health Corporation and Blodgett Memorial
Medical Center, corporations subject to the jurisdiction of the
Commission, have agreed to consolidate their services, facilities
and operations; that the proposed consolidation, if consummated,
would violate Section 7 of the Clayton Act, as amended, 15 U.S.C.
§ 18; and it appearing to the Commission that a proceeding by it
in respect thereof would be in the public interest, hereby issues
its complaint, pursuant to Section 11(b) of the Clayton Act, 15
U.S.C. § 21(b), stating its charges as follows:
DEFINITIONS
PARAGRAPH ONE: For purposes of this Complaint, the following
definitions shall apply:
(a) "General acute care hospital" means a health
care facility, licensed as a hospital, other than a
federally-owned facility, having a duly organized governing body
with overall administrative and professional responsibility, and
an organized professional staff that provides 24-hour inpatient
care, that may also provide outpatient services, and having as a
primary function the provision of inpatient services for medical
diagnosis, treatment, and care of physically injured or sick
persons with short term or episodic health problems or
infirmities.
(b) "General acute care inpatient hospital services"
means 24-hour inpatient health care at a general acute care
hospital, and related medical or surgical diagnostic and
treatment services, for physically injured or sick persons with
short term or episodic health problems or infirmities.
(c) "Primary care inpatient hospital services" means
basic general acute care inpatient hospital services, such as
normal childbirth, general medicine, and basic general surgical
procedures.
THE PARTIES
PARAGRAPH TWO: Butterworth Health Corporation
("Butterworth") is a non-profit corporation organized,
existing and doing business under the laws of Michigan, with its
principal place of business at 100 Michigan N.E., Grand Rapids,
Michigan 49503. Butterworth, and/or its subsidiaries or
affiliates, owns and/or operates Butterworth Hospital, a general
acute care hospital in Grand Rapids.
PARAGRAPH THREE: Blodgett Memorial Medical Center
("Blodgett") is a non-profit corporation organized,
existing and doing business under the laws of Michigan, with its
principal place of business at 1840 Wealthy S.E., Grand Rapids,
Michigan 49506. Blodgett owns and operates Blodgett Memorial
Medical Center, a general acute care hospital in Grand Rapids.
JURISDICTION
PARAGRAPH FOUR: Butterworth and Blodgett are, and at all times
relevant herein have been, engaged in commerce, as
"commerce" is defined in Section 1 of the Clayton Act,
as amended, 15 U.S.C. § 12.
THE PROPOSED CONSOLIDATION
PARAGRAPH FIVE: On or about July 24, 1995, Butterworth and
Blodgett entered into an agreement to consolidate their
businesses by forming a common parent corporation. Respondents'
combined annual sales and their combined assets each exceed $600
million.
NATURE OF TRADE AND COMMERCE
PARAGRAPH SIX: For the purposes of this Complaint, the
relevant lines of commerce in which to analyze the proposed
acquisition are the production and sale of general acute care
inpatient hospital services and/or any narrower group of services
contained therein, including, but not limited to, primary care
inpatient hospital services.
PARAGRAPH SEVEN: For the purposes of this Complaint, the
relevant sections of the country are the greater Kent County
area, consisting of Kent County, together with portions of six
adjoining counties (southern Newago County, southwest Montcalm
County, western Ionia County, northern Barry County, northern
Allegan County, and eastern Ottawa County) for acute care
inpatient hospital services; and the immediate Grand Rapids area
for primary care inpatient hospital services.
MARKET STRUCTURE
PARAGRAPH EIGHT: The relevant markets -- i.e., the
relevant lines of commerce in the relevant sections of the
country -- are highly concentrated, whether measured by
Herfindahl-Hirschman Indices ("HHI") or by four-firm
concentration ratios.
ENTRY CONDITIONS
PARAGRAPH NINE: Entry into the relevant markets is difficult,
due to state certificate of need regulation of entry, substantial
lead times required to establish a new acute care hospital in the
relevant markets, and other factors.
COMPETITION
PARAGRAPH TEN: In the relevant markets, Butterworth and
Blodgett are actual and potential competitors.
EFFECTS
PARAGRAPH ELEVEN: The effects of the aforesaid consolidation
may be substantially to lessen competition in the relevant
markets in the following ways, among others:
(a) it would eliminate actual and potential competition
between Butterworth and Blodgett;
(b) it would significantly increase the already high levels of
concentration;
(c) it may provide the merged entity with the ability to
exercise market power;
(d) it may increase the possibility of collusion or
interdependent coordination by the remaining firms; and
(e) it may deny patients, physicians, third-party payers, and
other consumers of general acute care inpatient hospital services
the benefits of free and open competition based on price,
quality, and service.
VIOLATIONS CHARGED
PARAGRAPH TWELVE: The consolidation described in PARAGRAPH
FIVE, if consummated, would violate Section 7 of the Clayton Act,
as amended, 15 U.S.C. § 18.
NOTICE
Notice is hereby given to the respondents Butterworth Health
Corporation and Blodgett Memorial Medical Center that the
thirteenth day of December, 1996, at 10:00 a.m. o'clock, or such
later date as determined by an Administrative Law Judge of the
Federal Trade Commission, is hereby fixed as the time and the
Federal Trade Commission Offices, Sixth Street and Pennsylvania
Avenue, N.W., Room 532, Washington, D.C. 20580, as the place when
and where a hearing will be had before an Administrative Law
Judge, on the charges set forth in this complaint, at which time
and place you will have the right under said Act to appear and
show cause why an order should not be entered requiring you to
cease and desist from the violations of law charged in the
complaint.
You are notified that the opportunity is afforded you to file
with the Commission an answer to this complaint on or before the
twentieth (20th) day after service of it upon you. An answer in
which the allegations of this complaint are contested shall
contain a concise statement of the facts constituting each ground
of defense; and specific admission, denial, or explanation of
each fact alleged in the complaint or, if you are without
knowledge thereof, a statement to that effect. Allegations of the
complaint not thus answered shall be deemed to have been
admitted.
If you elect not to contest the allegations of fact set forth
in the complaint, the answer shall consist of a statement that
you admit all of the material allegations to be true. Such an
answer shall constitute a waiver of hearings as to the facts
alleged in the complaint, and together with the complaint will
provide a record basis on which the Administrative Law Judge
shall file an initial decision containing appropriate findings
and conclusions and an appropriate order disposing of the
proceeding. In such answer you may, however, reserve the right to
submit proposed findings and conclusions and the right to appeal
the initial decision to the Commission under Section 3.52 of the
Commission's Rules of Practice for Adjudicative Proceedings.
Failure to answer within the time above provided shall be
deemed to constitute a waiver of your right to appear and contest
the allegations of the complaint and shall authorize the
Administrative Law Judge, without further notice to you, to find
the facts to be as alleged in the complaint and to enter an
initial decision containing such findings, appropriate
conclusions and order.
NOTICE OF CONTEMPLATED RELIEF
Should the Commission conclude from the record developed in
any adjudicative proceedings in this matter that the proposed
consolidation challenged in this proceeding would if consummated
violate Section 7 of the Clayton Act, as amended, the Commission
may order such relief against respondents as is supported by the
record and is necessary and appropriate, including, but not
limited to:
1. Rescission of the agreement between respondents to
consolidate their businesses by forming a common parent
corporation.
2. If the consolidation is consummated, divestiture of either
Butterworth Hospital or Blodgett Memorial Medical Center
hospital, and associated assets, in a manner that restores both
hospitals as viable, independent competitors in the relevant
markets, subject to the prior approval of the Federal Trade
Commission.
3. A five (5) year ban on any combination of respondents'
hospitals, except as may be approved by the Commission.
4. A requirement, for a ten (10) year period, that each
respondent provide prior notice to the Commission of any hospital
acquisitions, mergers, consolidations, or any other combinations
of a respondent's hospital with any other hospital in the
relevant market.
5. Requirements that respondents file periodic compliance
reports with the Commission.
6. Any other provisions appropriate to correct or remedy the
anticompetitive effects of the transaction.
IN WITNESS WHEREOF, the Federal Trade Commission has caused
this complaint to be signed by its Secretary and its official
seal to be hereto affixed, at Washington, D.C. this eighteenth
day of November, 1996.
By the Commission, Chairman Pitofsky recused and Commissioner
Azcuenaga not participating.
Donald S. Clark
Secretary
SEAL