CentraCare secures antitrust clearance to acquire St. Cloud Medical Group by successfully asserting the "failing firm" defense
Clients CentraCare Health
CentraCare Health obtained antitrust clearance, through a consent decree with the Federal Trade Commission, to acquire St. Cloud Medical Group. The acquisition combines the two largest providers of adult primary care, pediatric, and obstetric / gynecological services in St. Cloud, Minnesota. CentraCare hired Jones Day as lead antitrust counsel after the FTC and Minnesota Attorney General's Office expressed significant concerns about the acquisition's legality under the antitrust laws and informed the parties that they would file a lawsuit to block the acquisition. The Jones Day team ultimately proved that SCMG was a financially failing physician group that had no alternatives to remain in business. According to the FTC press release, "SCMG is failing financially, has lost its sole remaining line of credit, and appears unlikely to improve its financial condition." Based on this finding, the FTC entered into a consent decree that permitted the transaction to close immediately subject to certain conditions aimed at mitigating the purported harm from the acquisition. CentraCare completed its acquisition of SCMG on October 7, 2016.
This matter marks the first known time since 2009 that parties obtained antitrust clearance for a transaction by successfully raising the failing firm defense. In fact, the failing firm defense was raised and rejected by the FTC (and courts) in several recent healthcare merger litigations, including the FTC's successful lawsuits to block St. Luke's Health System’s acquisition of Saltzer Medical Group in Boise, Idaho and ProMedica Health System's acquisition of St. Luke’s Hospital in Toledo, Ohio.