FTC Sues to Stop the Potentially Illegal Integration of New Orleans Area Hospitals Over Failure to Follow Federal Reporting Law

The Federal Trade Commission sued to stop Louisiana Children’s Medical Center (LCMC) from integrating three competing hospitals in the New Orleans area that it recently acquired, saying LCMC and HCA Healthcare, Inc. (“HCA”) defied federal law by consummating the $150 million acquisition without reporting it to U.S. antitrust authorities and without observing the mandatory waiting period.

In a petition filed with the U.S. District Court for the District of Columbia, the FTC is seeking a temporary restraining order and a preliminary injunction requiring that LCMC and HCA comply with the Hart-Scott-Rodino (HSR) Act, that LCMC hold the three acquired hospitals and related assets separate from its existing hospital system pending an FTC investigation into the transaction, and that LCMC give the FTC prior notice of certain transactions while the court resolves the agency’s dispute.

“We are seeking to hold LCMC accountable for disregarding the law by ignoring filing requirements and prematurely consummating their deal,” said FTC Chair Lina M. Khan. “Businesses that believe they can flout the law should be on notice: we will use the full scope of our authority to combat obstruction and to vindicate the FTC’s authority to investigate potentially illegal deals.”

LCMC is a non-profit corporation based in New Orleans that operates a network of six hospitals in the greater New Orleans area. On January 3, LCMC announced that it had finalized its acquisition of the three additional hospitals in the area — Tulane Medical Center, Lakeview Hospital, and Lakeside Hospital — from HCA, a nationwide operator of health care facilities based in Tennessee.

The $150 million value of LCMC’s acquisition from HCA exceeded the size threshold that, given the size of the parties, required the deal to be reported to federal antitrust agencies. Despite that, the agency said, LCMC and HCA consummated the transaction on January 3 without ever reporting it to the agencies.

To facilitate the FTC’s and DOJ’s review of certain large transactions, the HSR Act requires that parties to a merger that exceeds certain size thresholds report their proposed transactions to the agencies and observe a waiting period to give the Commission an opportunity to review the transaction and determine whether to investigate the transaction further.

In its petition, the FTC noted that LCMC and HCA have taken the position that the notification and waiting period requirements of the Hart-Scott-Rodino (HSR) Act do not apply because the Attorney General of Louisiana approved a Certificate of Public Advantage (known as a COPA) for the acquisitions under Louisiana state law. However, the FTC pointed out, the state’s grant of a COPA is not among the statutory exemptions under HSR Act and has not been recognized by any court as a basis for refusing to comply with the Act.

The Compliance, Premerger Notification, Office of General Counsel, and Mergers IV divisions were responsible for this matter.