Patients v. Hospitals: Why Define Markets At All if Every Market Satisfies the SSNIP Test?

Hospital merger cases are won or lost on geographic market definition.  The Third Circuit’s recent finding that it is appropriate to define geographic markets based on patient location will likely incentivize the FTC to define such geographic markets more frequently in future hospital merger litigations.  We consider the implications of defining a geographic market based on patient location and highlight a key shortcoming of this approach: since virtually any candidate geographic market based on patient location likely passes the Merger Guidelines’ Hypothetical Monopolist Test, any such conclusion is essentially meaningless and addresses an issue largely irrelevant to whether a proposed merger is likely anticompetitive. Consequently, the FTC’s reliance on patient-based markets could erode a key advantage that the FTC currently enjoys in hospital merger litigations: the courts’ willingness to endorse the Merger Guidelines’ presumption that mergers that sufficiently increase concentration are anticompetitive.

By Ken Field & Steven Tenn^[1]

I. INTRODUCTION

It is axiomatic that hospital merger cases are won or lost on geographic market definition. Of course, many antitrust economists and lawyers will tell you that enforcement decisions turn on competitive effects analysis and defining the relevant geographic market is mostly an afterthought. But the government has been wildly successful in convincing the courts to adopt the Horizontal Merger G