The Evanston initial decision: is there a future for patient flow analysis?

Abstract

This Article analyzes the October 2005 Initial Decision of the Federal Trade Commission Administrative Law Judge ordering Evanston Northwestern Healthcare Corporation to divest Highland Park Hospital on the grounds that the January 2000 merger of the entities violated Section 7 of the Clayton Act. In particular, this Article focuses on the ALJ's discussion of the use of patient flow analysis and the Elzinga-Hogarty test in defining relevant markets in hospital merger cases. Despite the ALJ's explicit rejection of the Elzinga-Hogarty Test and patient flow analysis as irrelevant and inappropriate in defining markets in the highly differentiated Hospital market, the author concludes that the ALJ's rejection of patient flow analysis likely was a response to misplaced and over-reliance on patient flow analysis by a number of courts in past prospective government challenges to hospital mergers as evidenced by the fact that the ALJ's analysis of competition and competitive effects relied upon, and thereby implicity endorsed, the use of patient flow analysis for certain purposes. Finally, the author concludes that patient flowanalysis, when used appropriately, should continue to be used as a preliminary step in geographic market definition and competitive effects analysis.