Planned Shannon and Community Merger on Hold

SAN ANGELO, TX -- As the Shannon and Community merger gets closer to becoming a reality, the Federal Trade Commission is urging Texas regulators to block the planned merger.

In the letter submitted to the agency, the FTC alleges the merger of the San Angelo hospitals and the merger of Hendrick Health System and Abilene Regional would negatively impact patients in the area.

"Although our comment has focused primarily on the Hendrick COPA Application, we do not intend to diminish potential concerns about the Shannon COPA Application Indeed," said FTC in the letter. "Our economic analyses of the proposed Shannon merger indicate that it is likely to raise substantial concerns that HHSC may wish to consider as it evaluates the Shannon COPA."

Several issues were raised in the complaint brought forward by the FTC including the impact to registered nurses in the area and lack of competition from surrounding hospitals.

Diversion Ratio Analysis Confirms that Shannon and SACMC are Closest Competitors

"The analysis confirms that Shannon and SACMC are extremely close competitors in the market for inpatient services. FTC staff calculates that if Shannon were no longer an option for area residents, 58.8% of the patients who currently use Shannon would seek care at SACMC. Conversely, if SACMC were no longer an option for area residents, 70.5% of the patients who currently use SACMC would seek care at Shannon."

"These diversion ratios strongly indicate that a merger between Shannon and SACMC would substantially lessen competition and lead to significant price increases, as well as reduced incentives to maintain or improve quality."

High Market Shares and Concentration Levels in the Shannon Service Areas Confirm that the Shannon COPA Is Likely to Result in Significant Disadvantages 

"The Shannon COPA Application does not define a relevant antitrust market for the proposed merger. However, Shannon does propose a Primary Service Area (“PSA”) and Secondary Service Area (“SSA”) as potentially relevant geographic service areas."

"Similar to our approach in analyzing the proposed Hendrick merger, FTC staff calculated shares and concentration in the Shannon SSA to evaluate the likely competitive effects of the proposed Shannon merger."

"We do not believe the Shannon Secondary Service Area necessarily constitutes a relevant geographic market for antitrust purposes."

The data examined by the FTC "shows that no other hospital system’s share would come close to that of the merged hospital entity" in San Angelo.

Shannon and SACMC are Closest Competitors and Face Little Competition from Other Hospitals 

"One concern with the service area patient choice analyses of the proposed Shannon merger is that the Primary Service Area and Secondary Service Area proposed by Shannon appear to be vastly overstated."

"The Shannon PSA and SSA patient choice statistics approach monopoly levels and indicate that Shannon and SACMC combined would face little competition. These descriptive analyses are consistent with the diversion ratio analysis, which indicates that Shannon and SACMC are each other’s closest competitors for inpatient services."

"Concentration numbers approach monopoly levels and far exceed those that would create a presumption of illegality under the Merger Guidelines and the relevant case law.198 The combined Shannon-SACMC hospital system would have a share of 62.3% of inpatient hospital services in the Shannon SSA."

"The combined share and HHI calculations also exceed the levels in past hospital mergers that courts have found to be anti competitive and blocked. Table A1 shows that no other hospital system’s share would come close to that of the merged hospital entity."

Shannon Merger Would Likely Depress Wage Growth for Registered Nurses 

"For the proposed Shannon merger, this commuting zone consists of the following six counties: Coke, Concho, Irion, Runnels, Sterling, and Tom Green. Shannon and SACMC are both located in this commuting zone."

"FTC staff found that the labor market for registered nurses is highly concentrated before the proposed merger and that the merger would increase concentration to an extraordinarily high level. "

"This indicates that the reduction in competition caused by the proposed Shannon merger in the labor market for registered nurses is likely to be extraordinarily high. "