Consider a metropolitan hospital market that is dominated three systems (i.e. these firms satisfy more than 80 percent of demand in the market). System A has facilities located throughout the entire market and enjoys approximately a 30 percent market share. System B has facilities in the city and northern suburbs, while the System C has facilities in the city and the western suburbs. The market has a number of large employers - and employees live in the center city as well as both the Northern and Western suburbs. On average, employees living in the suburbs commute 30-45 minutes into the city, and it is hard to drive between the suburbs quickly.

This market has two dominant insurers and a few smaller insurance plans that earn little profits. In addition, System B recently began offering a provider sponsored insurance plan where they are both the insurer and the healthcare provider. As part of this insurance plan, System B offers "value based" care where patients are required to receive all healthcare within the system and practitioners focus on providing lower cost care. Despite successfully achieving a lower cost basis for the patients in the provider sponsored plan compared to patients covered dominant insurer, to date most of the enrollees for that plan come from Medicare Advantage. Despite extensive marketing efforts. System B has been largely unsuccessful selling this plan to employers in the market.

System B proposes to purchase System C and integrate its facilities into its provider sponsored insurance plan. After reviewing clinical practices at System C, the managmement of System B believes the assets of this system are well suited to the practice style of their value-based insurance plan.