AAI Praises Massachusetts Judge for Rejecting Hospital Merger Settlement

The American Antitrust Institute (AAI) praised yesterday’s decision by a Massachusetts Superior Court Judge to reject a proposed settlement that would have allowed the Partners Healthcare System hospital merger to move forward. Partners, the dominant hospital system in Eastern Massachusetts, proposed acquiring two community hospital systems in suburban Boston.

AAI Vice President and General Counsel Richard Brunell said, “The decision should send a signal to state and federal antitrust enforcers that they shouldn’t settle for remedies that do not provide adequate protection for competition and consumers.”

The rejected settlement purportedly addressed former Massachusetts Attorney General (AG) Martha Coakley’s concerns over the anticompetitive effects of combining the hospital systems. But the Court ruled that the settlement was not in the public interest because it did not resolve such concerns and would be difficult to enforce.

The Judge, Janet Sanders, cited the AAI’s filings “as among the most valuable” of the public comments.

“We were pleased that the Court accepted AAI’s and other opponents’ arguments that complex and hard-to-enforce price caps are other conduct remedies are not an effective way to resolve harmful mergers,” said AAI President Diana Moss. “Conduct remedies in antitrust cases do not involve reducing the share of the merged firm or concentration in the market – only that the merged firm adhere to certain conditions.”

The AAI filed two sets of comments opposing the settlement, including analysis by Northeastern University Professor of Economics John Kwoka. Judge Sanders rejected the former AG’s argument that the AAI filings should be given little weight because the AAI favors strong enforcement of the antitrust laws. “[T]his does not diminish the value of AAI’s input,” the Court said.

The Court made particular reference to the AAI’s criticisms of the proposed price caps and “component-contracting” mechanism, as well as skepticism of conduct remedies. Among other things, the Court noted the complexity of the price cap methodology and difficulty of a court supervising a decree that makes it an “ad hoc regulatory agency.”

Brunell noted, “We hope this decision emphasizes to courts that they are not rubber stamps when they review proposed consent decrees.” Earlier in the week, the incoming Attorney General announced that she would withdraw from the settlement and seek to block the deal if the judge rejected it, so there will be no basis for an appeal.

Media Contacts:
Richard Brunell

Diana Moss