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Show market was based on patient flow data indicating that patients typically do not leave this area in search of medical treatment, but rather select a hospital within these Wasatch Front counties.4 While network competition certainly includes Utah County, the FTC did not include it in the relevant market only because neither Columbia nor HTI owned a hospital in Utah County. Given the FTC's geographic market and the product market, the legal issue boiled down to whether the Columbia/HTI merger increased concentration in an already concentrated market. The answer was an obvious yes. The post-merger HHI based on hospital beds was approximately 3450 (nearly twice the HHI 1800 benchmark) with a change as a result of the merger of approximately 350 (3.5 times the 100 benchmark). Moreover, the merger would have combined the second and third largest firms in the market, with 18 percent and 10 percent market shares respectively, resulting in a CR4 of 95 percent, thus exceeding the concentration level set by the courts for a presumptively illegal merger.5 The picture is the same if admissions data are used. Table 1 shows the Wasatch Front acute care market shares based upon total hospital admissions. As is evident, the concentration ratios based on admissions data also far exceed legal standards. So why have FTC's detractors been so outspoken in their criticism of the ordered divestiture? What follows is an analysis of the various arguments presented in the debate and an explanation of the economic underpinnings of the FTC's order. The Unique Nature of Utah's Health Market Interestingly, the claimed unique nature of Utah's health care market was an argument advanced by both supporters of and detractors from the FTC's ordered divestiture. Advocates of the Columbia/HTI acquisition argued that IHC's dominance in the Wasatch Front market is so complete that any dilution of Columbia/HTI would hamper the company's ability to compete with IHC. The advocates also argued that, in any event, the divested hospitals could not be combined into an effective competitor. In contrast, those arguing for divestiture countered by contending that the Wasatch Front is so dominated by managed care insurance that it was Table 1. Wasatch Front Hospital Admissions for 1993 HOSPITAL IHC:6 Alta View Hospital Cottonwood Hospital LDS Hospital McKay-Dee Hospital Center Primary Children's Med. Or. Subtotal COLUMBIA/HCA: Davis North St. Marks Subtotal HTI: Jordan Valley Lakeview Hospital Mountain View Ogden Regional Pioneer Valley Subtotal University FHP Salt Lake RMC TOTAL Concentration Ratios HHI = 2962 Change in HHI = 504 CR4 = 92% SOURCE: American Hospital Association Guide to the Health Care Field, 1994 Edition, pp. A458-461 ADMISSIONS SHARI 4,169 9,645 17,953 13,218 9.250 54,235 47% 4,102 12.453 16,555 14% 2,316 3,404 3,846 7,615 3.577 20,758 18% 14,672 13% NR NR 9,186 8% 115,406 100% NR = Not reported Much Ado About Nothing |
