Statement 1 of the Statements of Antitrust Enforcement Policy in Health Care recognizes that small hospitals, particularly those in rural areas, may be unable to achieve cost savings through efficiencies, such as those that could be achieved by larger hospitals. Statement 1 also notes that, in many cases, a small rural hospital may be the only hospital in the relevant geographic market. As a result, Statement 1 provides an antitrust safety zone for mergers involving small hospitals; the antitrust enforcement agencies will not challenge transactions involving these small hospitals, “absent extraordinary circumstances.”

To meet the safety zone, the small hospital must:

• have fewer than 100 licensed beds over the three most recent years,
• have an average daily inpatient census of fewer than 40 patients in the last three years, and
• be more than five years old.

The safety zone may be useful for small rural hospitals contemplating transactions in order to be able to respond to increasing pressures to create efficiencies.