Hershey-Pinnacle merger: Not gonna happen?

CPBJ

Hershey Medical Center and PinnacleHealth will likely call off their proposed merger.

 

In December 2015, the Federal Trade Commission and “the Pennsylvania Attorney General’s Office originally sought an injunction against the merger.” (CPBJ)

 

On Sept. 27, the U.S. Third Circuit Court of Appeals in Philadelphia ruled “to allow a preliminary injunction to stand. The injunction prevents Hershey Medical Center and PinnacleHealth from merging until a Federal Trade Commission administrative law judge rules.”

 

According to CPBJ, chances of the companies winning in front of an FTC judge are very low.

 

So why did FTC seek to prevent the merger? Because they feared it would lead to reduced competition, higher healthcare costs and lower quality of care. Microeconomics students will be delighted to see the FTC’s use of the Herfindahl-Hirschman
Index in their analysis (in bold below).

 

In their injunction petition (pdf), FTC notes:

 

The Merger is likely to substantially lessen competition for healthcare services in Harrisburg, Pennsylvania, and its surrounding communities, leading to increased healthcare costs and reduced quality of care for over 500,000 local residents and patients.

 

2. Today, Hershey owns and operates one GAC hospital in the Harrisburg area, while Pinnacle operates three GAC hospitals.  Hershey and Pinnacle operate the only three hospitals located in Dauphin County.  Both Hershey and Pinnacle are high-quality health systems that, with limited exceptions, offer an overlapping range of GAC inpatient hospital services (“GAC services”)….

 

3.  Hershey and Pinnacle are close competitors for GAC services in the Harrisburg area.  Hershey and Pinnacle vigorously compete on price, quality of care, and services provided, both for inclusion in commercial health plan networks and to attract patients from one another.  The rivalry between Hershey and Pinnacle has benefited local patients with lower healthcare.costs and increased quality of care.  The Merger would eliminate this significant head-to-head competition between Hershey and Pinnacle and its related benefits.

 

4. The Merger would substantially lessen competition in the market for GAC services sold to commercial health plans in an area roughly equivalent to a four-county region comprised of the Harrisburg Metropolitan Statistical Area (Dauphin, Cumberland, and Perry Counties) plus Lebanon County (the “Harrisburg Area”).

 

5.  The only significant competitor of the Defendants in the Harrisburg Area is Holy Spirit Hospital (“Holy Spirit”), which is a smaller community hospital located in easte1n Cumberland County that offers a more limited range of services than Hershey or Pinnacle.  There are two other hospitals located on the outskirts of the Harrisburg Area.  They are even smaller community hospitals that offer a more limited range of services than Holy Spirit and a much more limited range of services than the Defendants. Neither of these hospitals meaningfully constrains Hershey or Pinnacle.

 

6.  Post-Merger, the combined entity will account for approximately 64% of all GAC services in the Harrisburg Area.  Using the Herfindahl-Hirschman Index (“HHI”) to measure market concentration, the post-Merger HHI would be approximately 4,500 with an increase of approximately 2,000 points.  This high market share and corresponding high concentration level render the Merger presumptively unlawful under the relevant case law and likely to increase market power-by a wide margin-under the 20 l 0 U.S. Department of Justice and Federal Trade Commission Horizontal Merger Guidelines (“Merger Guidelines”).

 

7.  The Merger would substantially increase the combined entity’s bargaining leverage in negotiations with commercial health plans.  The combined entity would be able to exercise market power by raising prices and reducing quality and services, ultimately harming Harrisburg Area residents and patients.

 

8.  Entry or expansion by other providers of the relevant services is unlikely to occur, much less in a manner that is timely, likely or sufficient to deter or mitigate the loss of price and non-price competition in the near future.

 

9.  Finally, the Defendants’ efficiency claims are overstated, speculative, unverifiable, not merger-specific, or result from an anticompetitive reduction in output, quality, or services, and are largely non-cognizable.  Any cognizable efficiency claims are insufficient to offset the substantial competitive harm the Merger is likely to cause.

 

Posted in: Health care

South China Sea dispute: Who pays legal costs?

WaPo

Not China.

 

The Permanent Court of Arbitration (PCA) in The Hague, Netherlands, has ruled that China’s claims of historical rights over South China Sea (SCS) has no legal basis. The case against China was initiated by the Philippines. (The Hindu, July 12, 2016).

 

PCA’s report (pdf) notes that the Philippines was forced to pay China’s share of the legal costs:

Article 33 of the Rules of Procedure states that the PCA may from time to time request the Parties to deposit equal amounts as advances for the costs of the arbitration. Should either Party fail to make the requested deposit within 45 days, the Tribunal may so inform the Parties in order that one of them may make the payment. The Parties have been requested to make payments toward the deposit on three occasions. While the Philippines paid its share of the deposit within the time limit granted on each occasion, China has made no payments toward the deposit. Having been informed of China’s failure to pay, the Philippines paid China’s share of the deposit.

 

Posted in: International

Longest tunnel: Switzerland-Italy


35 Miles Underground Through the Gotthard Base Tunnel (Slate).

 

Nightmare fuel? An 'ibex' surrounded by dancing haystacks (Keystone)But opening ceremony is controversial.

 

Posted in: Uncategorized

The 2016 Geneva Study Tour: Nordics, United Nations and Refugees

un1“I have bad news and good news,” I said to my Geneva study tour group. I had just finalized the purchase of the round-trip tickets from Newark to Geneva, and the students were keen to learn about the flight details.

 

“First, the bad news. We don’t have a direct flight.” They were glumly silent, and I said, “That is not the bad news. We have a nine-hour stopover enroute to Geneva.”

 

The groans were now clearly audible. “So what’s the good news?” they said.

 

“The stopover is in Copenhagen.”

 

copenhagen-1And that is how we came to spend several hours in the capital city of Denmark, visiting the tourist area of Nyhavn, taking a canal boat tour, and generally paying through our noses for food. Food in the Nordic countries does not come cheap. (Few things do.)

 

But we had a guide to help us. Anders is an economics student at the College, and he happens to be Danish. More importantly for us, he happened to be home in Copenhagen during our visit. He joined us for the larger part of the day, and made our brief detour through the city vastly more enjoyable.

 

And then it was on to Geneva. We spent a week visiting various international organizations and attending briefing sessions. The United Nations, the World Trade Organization, the United Nations High Commissioner for Refiugees, among others, were on the program. We also made a trip to Bern, the capital city of Switzerland, and visited the German embassy.

 

We were now part of a larger group, along with students from a university in Konstanz, Germany. We spent two days in Konstanz, where our students were hosted by their German counterparts. In a particularly memorable session, our group met with a local organization helping refugees from Syria and Afghanistan learn about the language and culture in their new land. We heard directly from refugees about their harrowing voyages across the sea and journeys over land which, finally, had brought them to this south-western corner of Germany.

 

On the way back to the States, we had not one but two stopovers, both in Nordic airports. But this time, they were relatively brief, giving us just enough time to admire the minimalist décor of the airports in Copenhagen (again) and Stockholm. And to spend a small fortune on sparkling water. These Nordic countries can be murder on your wallet.

Posted in: Uncategorized