CHD and the Law: Hospital Mergers, Part 1

This blog series features stories involving congenital heart disease and the law. The blog posts may discuss contemporary or historical court decisions, laws or regulations, or other legal issues that relate directly or indirectly to CHD. These posts are purely for entertainment and educational purposes and are not legal advice. Any opinions expressed in this series of posts are solely those of the author and do not represent the Adult Congenital Heart Association.

In the late 80s, I had my first two open heart surgeries at North Shore Hospital on Long Island. About 20 years later, I went back to the same hospital for my pulmonary valve replacement, but for some reason, the hospital had a new name: North Shore-LIJ. In fact, “North Shore-LIJ” wasn’t just one hospital, but was a conglomerate of 16 hospitals located all over Long Island and parts of New York City.

I learned that two hospital systems—“North Shore Health System, Inc.” and “Long Island Jewish Medical Center”—had merged. Interestingly, the Department of Justice (DOJ) Antitrust Division sued the two hospital systems in an unsuccessful attempt to prevent the merger.

The purpose of antitrust law (and the Antitrust Division at DOJ) is to protect consumers from the potential harms of an unregulated free market. For example, imagine there is a town with only two stores that sell pants. People can’t get pants from other sources and it costs $5 for both stores to make each pair of pants.

In a healthy marketplace, these two stores should be in fierce competition. So, if one decided to sell its pants for $10, the other might try to undercut them and sell pants for $8. Both stores might even reduce their price to just over $5, and consumers walk away paying a fair price.

Now let’s imagine the two stores decided to merge. After they merged, there wouldn’t be any competition, and the new pants store would be free to jack up prices to $20, $30, even $100. On the other hand, they may argue that their merger could actually help consumers, because they could reduce overhead and cut costs to only $3 per pair, and as a result, they could reduce their price to $4 per pair.

Antitrust laws in the United States are designed to prevent control of the market by one company or one person. In the example of the pants company, if the DOJ could show that the merger might result in increased prices at the pants stores, the merger might be prohibited. On the other hand, if the companies could demonstrate that the merger would have “procompetitive benefits” in the form of lower prices, the merger might be allowed to go through.

Now, what does all of this have to do with congenital heart defects, you may ask? Find out in the second part of my post.

This blog post references United States v. Long Island Jewish Med. Ctr., 983 F. Supp. 121 (E.D.N.Y. 1997).