WASHINGTON, D.C. — The Federal Trade Commission is using Adena Health’s acquisition of Fairfield Medical Center in southeastern Ohio to warn financially distressed hospitals that they must conduct broad searches for buyers before relying on financial trouble to justify mergers that threaten competition.
Adena completed its acquisition of Fairfield Medical Center, or FMC, on Sept. 1 after an earlier proposed sale to OhioHealth was abandoned following an FTC investigation. Commission staff had concluded the OhioHealth transaction risked higher costs and diminished quality of care because the combination would have controlled a high share of inpatient hospital admissions in and around Fairfield County.
The FTC worked with the Ohio Attorney General’s Office during its review and encouraged FMC to seek alternative buyers through a broader sales process. That effort attracted multiple potential purchasers and ultimately resulted in FMC choosing Adena instead of OhioHealth, according to the agency.
Adena does not currently operate a hospital in Fairfield County or surrounding areas, a distinction the FTC says allows FMC to remain an independent competitive constraint on OhioHealth.
The outcome also gives the commission a case study for how it intends to assess hospital mergers involving financially distressed sellers.
FTC Chairman Andrew Ferguson, joined by Commissioner Mark Meador, issued a statement outlining what the agency expects from companies seeking to establish that a financially troubled business has no competitively preferable buyer.
“Financial distress is not a blank check for mergers that would substantially reduce competition between hospitals and risk leaving patients with higher costs and lower quality care,” Ferguson wrote.
The failing-firm defense sets a demanding standard for transactions that otherwise raise antitrust concerns. Ferguson cited the U.S. Supreme Court and the 2023 Merger Guidelines in saying a company must face a grave probability of failure, have little or no prospect of reorganizing in bankruptcy and demonstrate through a good-faith search that the proposed acquirer is the only available purchaser.
For hospitals, that means financial distress alone would not justify selling to a close competitor if another buyer could preserve more competition.
Ferguson said the FTC examines whether a seller sought interest from the full range of potential buyers, gave prospective purchasers enough time to evaluate a transaction and provided them sufficient and equal access to information. The agency also considers whether sellers dealt with interested buyers in good faith and appropriately considered offers from purchasers presenting fewer competitive concerns.
Those requirements can also serve sellers’ financial interests by generating more attractive offers than a limited sales process, Ferguson wrote. But when an alternative offer would preserve competition, the FTC’s position is that a distressed seller cannot choose a more lucrative anticompetitive transaction instead.
The commission is also signaling that inadequate sale processes can trigger intervention before a merger reaches litigation.
Ferguson advised financially distressed hospitals to document their search for buyers so regulators can determine whether a broad range of potential purchasers received an opportunity to bid. If the process is deficient, he said the FTC may require the hospital to conduct another sale process rather than immediately pursuing a court challenge.
FTC Bureau of Competition Director Daniel Guarnera similarly warned that the commission would scrutinize hospital transactions involving failing-firm arguments and could seek to block deals when sellers have not adequately searched for alternatives.
“The standard is demanding, and if you have not searched broadly for a buyer, we will work expeditiously with firms to investigate whether there is a better buyer and, if the Commission deems it necessary, go to court to block a bad deal,” Guarnera said.
The Fairfield transaction was resolved without litigation. The FTC said Adena’s acquisition preserves competition between FMC and OhioHealth for both patients and health-care workers in southeastern Ohio.
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