Case A

Hapless Health System (HHS) is a non-stock, nonprofit holding company that owns three nonprofit hospitals in Virginia and manages six others. The company also owns a number of for-profit subsidiaries, including a helicopter ambulance service, an eye, ear, nose and throat clinic, a pharmacy, an insurance company and a health club. HHS's largest facility is Roanoke Memorial Hospital in Roanoke, a facility licensed for 677 acute beds. Occupancy averages something les than 55o patients. Roanoke is a teaching affiliate of Virginia Medical School in Charlottesville.

HHS also owns Bedford County Memorial Hospital in Bedford, a facility licensed for 75 beds, and Radford Community Hospital in Radford, a facility licensed for 120 beds. In addition, HHS manages Franklin Memorial Hospital in Rocky Mount, licensed for 60 beds, Giles Memorial Hospital in Pearisburg licensed for 60 beds, Wythe County Community Hospital in Wythe County and Tazewell Community Hospital in Tazewell County.

Community Hospital of Roanoke is a nonstock, non-profit corporation that owns a hospital by the same name in downtown Roanoke.The facility has 400 licensed beds of which 220 are staffed. Occupancy averages about 175 patients. Both HHS and Community have been organized principally to provide hospital services to the general public, and both provide indigent care to the extent that funds are available. The board of directors of both institutions are comprised in large part of business leaders from the Roanoke area who have sought to minimize health care costs to employers and patients.

Both Roanoke Memorial and Community draw more than half of their patients from the Roanoke metropolitan area, including the cities of Roanoke and Salem and Roanoke County. About 53% of Roanoke Memorial's patients come from this area, while Community draws about 74% of its patients from there. Hospital Corporation of America owns a hospital in Salem (Lewis-Gale) that is licensed for 406 beds and averages an occupancy of about 272.Lewis -Gale receives about 70% of its patients from the Roanoke area.

All three hospitals draw substantial numbers of patients from outside the immediate vicinity of Roanoke. Roanoke Memorial draws 27% of its patients from an area that includes Allegany, Bedford, Botetourt, Craig, Floyd, Franklin, Giles, Montgomery and Wythe Counties and the cities of Lynchburg and Radford in Virginia as well as Greenbriar, Mercer and Monroe Counties in West Virginia. The hospital treats at least 100 patients a year from each of these localities and from each of the following: Amherst, Campbell, Patrick, Smyth and Tazewell Counties and Carroll County together with the City of Galax. Roanoke Memorial receives an average of $5,000 in revenue from each patient.Community draws 18% of its patients from an area that includes Allegany, Bedford, Craig, Floyd, Franklin, Montgomery, and Rockbridge Counties and the city of Lynchburg, all in Virginia.Twenty percent of the patients who receive treatment at Lewis-Gale come from an area that includes Bedford, Craig, Botetout, Floyd, Franklin and Montgomery Counties.

All three hospitals in Roanoke and Salem provide primary, secondary, and some types of tertiary care. Roanoke Memorial provides a significantly greater variety of care at this level and thus tends to treat more serious illnesses than the other two hospitals. Community, while offering some tertiaty services, provides the least such care of the three hospitals.

Roanoke Community and Roanoke Memorial want to merge to provide better efficiency and reduce overlap of services in Roanoke. Lewis-Gale would not be involved in the transaction. The US Justice Department's Antitrust Division has challenged the proposed merger.

Please evaluate the government's chance of success and provide your rationale.