Rockford Hospitals Abandon Merger After Preliminary Injunction Order

The proposed acquisition by OSF Healthcare System (OSF) of Rockford Health System (Rockford) is abandoned after the United States District Court for the Northern District of Illinois grants the FTC's request for a preliminary injunction. According to the opinion by Judge Kapala, the claimed efficiencies appeared too speculative at this point in the litigation to overcome the FTC's strong prima facie case. See Federal Trade Commission v. OSF Healthcare System and Rockford Health System, No. 11C50344 (N.D. Ill. Apr. 5, 2012).

The administrative complaint in this matter identified concerns in both the hospital and physician services markets, and the FTC alleged that the merger is "presumptively unlawful by a wide margin." See OSF Healthcare System and Rockford Health System, 111 FTC 0102 (2011). According to the FTC, OSF/Rockford's post-merger market share in the market for general acute-care inpatient hospital services would be 64 percent, and the merger would increase the Herfindahl-Hirschman Index (HHI) by 2032. In addition, the FTC alleged that postacquisition, OSF/Rockford and SwedishAmerican would be the only two competitors left in the market, controlling 99.5 percent of the Rockford hospital market, thus increasing the likelihood of, and incentive for, coordinated interaction. The FTC further alleged that the post-merger health system would control 37.4 percent of the primary care physician market; the HHI index would increase by 696. According to the FTC, the merger will reduce the number of hospital-employed physician groups from three to two in the Rockford region and leave the remainder of the market highly fragmented with small independent physician practices.