Benedictine Health Centers

0
e, LNITED STATES OF 4 W E R l C 4
FEDERAL TRADE COMMISSION
U .ZSHibGTOiu, D C 	110580
BUREAU OF COMPETITION
Patrick M, Sheller, E s q .
MeKenna & 	Cuneo
1575 Eye Street, N,W.
Washington, B.C. 	20685
Dear Mr, Sheller8
T h i s 	responds to your request for an advisory opinion
concerning eertain actions 	that your client, Benedictine Health
Centers, 	intends to undertake. 	According to your letter,
Benedictine Health Centers ("Benedictine"),owns and operates two
hospitals located about ten miles apape: 	St, Thomas More
Hospital, 	located in Canon C i t y , 	and St. Joseph Hospital, located
in Florence, Colorads, 	Benedictine intends to close St. Joseph
Hospital and convert the building to medical offices,
Benedictine has provided 	free office space near St. Joseph
Hospital to several physicians who currently practice there.
This was done in order to assist those physicians in establishing
practices in the community. 	However, Benedictine has recently
made a unilateral decision that 	it will no longer provide free
office sgaee to those physicians, 	Instead, Benedictine plans to
recruit different physicians, some of w h o m practice in the s m e
specialties as the physicians who have been receiving free office
space, to practice at St. 	Thomas lore Hospital. 	As an inducement
to those physicians, Benedictine plans to provide the newly
recruited physicians with fsee office space and support senices
in the office building that will occupy the present site of S k .
Joseph Hospital.
The physicians who are currently receiving fsee office space
have peivileges at St. Thomas More Hospital, and will continue 	to
do so. 	mndictine believes that rental office space is
available in the vicinity of St. Thomas More Hospital,
The question on which you have requested an advisory opinion
is as follows:
whether 	Benedictine" 	unilateral decision to close t h e
Florence facility, Lo convert it to physician office space,
and to provide free space in that facility to newly
recruited specialty physicians, but not the inembent
speciali%U, nay vioPate Section 5 	of the Federal Trade
Comission Act,

Patrick M. 	Sheller, E s q .
Based on your description of the conduct that Benedictine
proposes to undertake, it does not 	appear that the contemplated
actions are likely to violate Section 5 o f 	the Federal Trade
Gomission Wet, 	The unilateral decision to close St, Joseph
Hospital does not appear to raise any antitrust issues,
Likewise, based on the infomation available to us, Benedictine's
decision to withdraw its financial support from some pwsieians
practicing in the cornunity and to provide financial assistance
to sther physicians, does not 	appear to violate Seetion 	5.
For the purpose sf this opinion, 	it is assumed that
Benedictine itself 	i s n o t 	and wi41 not 	be a competitor in the
physician s e n i c e s markets in q e s t i o n , 	Rather, it provides
services i n an adjacent market and is recruiting new physicians
into the cornunity in the hope of increasing demand f a r 	the
hospital semices that it provides. 	This does not appear either
to involve an agreement that restrains competition unreasonably
or to constitute monopolization of any market,
Your letter states that Benedictine has made a unilateral
decision to offer free office space to the new physicians rather
than to those already in the comunity, 	Therefore, the concerted
action necessary for a Sheman Act Section 1 violation is
lacking, 	In addition, the action does not appear to restrain
competition in the market for physician semices. 	While the free
office spaee will elearly benefit one group sf competitors, the
physicians already in the cornunity will continue to kave
privileges at St. Thomas More Hospital and will be able to
continue to practice in the c o m u n i l y . 1
Nor does it appear that Benedictine" 	conduct 	raises issues
under a Sheman A c t 	Section 2 analysis, 	As stated above,
Benedictine does not 	appear to kave an ownership interest in the
physician practices in westion, and is not a competitor in t h e
physician 	senices markets, 	Therefore, Benedictine does not
appear to be attempting either to aeqire market power in the
"oreover, 	even if Benedictine entered into an agreement
with the newly recruited physicians that only they could practice
* at the hospital the antitrust laws would not necessarily be
violated; suck an agreement would be effectively an exelusive
1;
so- 	opinion),
I

P a t r i c k M. 	Sheller, E s q .
physicians s e n i c e s markets 	or to use whatever power 	it possesses
in the hospital services market 	to gain power 	in t h e 	physician
sewices markets.
The C s m i s s i s n has taken the position that a firm possessing
monopoly power in one market may not discriminate unjustifiably
mong customers in an adjacent market who compete with one
another, if the discrimination causes substantiag i n j u q to
(8982), 	These cases 	were brought on t h e L h e o q that a monopolist
w i t h control aver a unique 	or essential facility cannot refuse,
without a significant business justification, to deal with a
portion of the class of person who have a eomereial necessity to
use that facility. 	However, Benedictine" 	conduct 	in t h i s
instance does not appear to violate the p r i n c i p l e s 	expressed in
those eases,
First, it is not clear that Benedictine is in fact a
monopolist in the hospital services market, 	While there are no
other hospitals in Cannon City or Florence, those two cornunities
are not far from Pueblo, whose hospitals may offer substantial
competition to St. Thomas More at least with respect Lo some
services, 	Second, none of the physicians is being denied access
to the facility controlled by the possible monopolist -- the
hospital -- and there is no reason to believe that the hospital
controls all t h e rental space in the cornunity suitable f o r
medical offices. 	Third, Benedictine" 	action would not	p r r ~ p ~ s e d
appear to significantly injure competition in the physician
senices market, 	While receipt of 	free office space may confer
on the favored physicians some competitive advantage,
Benedictine" 	proposed action would result in new entry into the
physician sewices market and provide eonsuers with additional
choices, 	Furthemore, it would not have any directly
exelusionam effects, 	Conseqently, Benedictine" 	proposed
action might enhance rather than suppress competition,
For the reasons discussed above, it does not appear likely
that the eonduet that Benedictine proposes to undertake would
violate Section 5 of the Federal Trade Comission A c t , 	Under the
Comission" 	Rules of Practice S1.3(c), 	the Comission 	is not
bound by this staff opinion and reserves that right to rescind it
at a later time, 	In addition, this office retains the r i g h t 	to
reconsider the questions involved and, with notice to the

P a t r i c k 	M. 	Sheller, E s q .
requesting party, to rescind or revoke t h e opinion i f
implementation of 	t h e proposed conduet 	results in substantial
anticompetitive effects, if the conduct 	i s motivated by an
improper 	purpose, or if the p u b l i c 	interest othemise so
requires,
&ark 	J. Hsrosehak
Assistant Director