The agency has been denied not once, but twice as it aims to nix Novant Health’s acquisition.
A district court has declawed the Federal Trade Commission (FTC) in the antitrust agency’s attempt to halt another hospital acquisition.
After denying the FTC’s preliminary injunction to block Novant Health’s $320 million purchase of two hospitals from Community Health Systems (CHS) last week, U.S. district judge Kenneth Bell again denied another motion to stop the deal on Tuesday.
The agency had filed a lawsuit against the transaction in January before seeking a preliminary injunction in March, deeming the deal “unlawful” because it would create overwhelming market consolidation to the tune of 64% in the Eastern Lake Norman Area.
However, Bell said in his initial ruling that the market is already concentrated without the acquisition due to Atrium Health owning nine of the region’s 19 hospitals, while Novant owns seven. Allowing Novant to strengthen its position would enable it to better compete with Atrium, while also increasing the likelihood of the two purchased hospitals remaining open under new ownership.
“Therefore, the proposed merger carries at least as much likelihood of competitive benefits as it does competitive harm and the FTC is unlikely to ultimately be successful in proving that the transaction may ‘substantially lessen competition,’” Bell wrote.
Novant president and CEO Carl Armato said the health system was “thrilled” with the court’s ruling.
“This outcome is a victory for the area, and our plan to deliver on the commitments we’ve made begins now,” Armato said in a statement. “We have always believed these communities deserve access to a rich healthcare ecosystem with robust and comprehensive care services from family physicians to pediatrics and specialty care.”
The judge followed up the decision by once again denying the FTC’s latest preliminary injunction while the case is being appealed.
Bell reiterated that stopping the deal would lead to Davis Regional Medical Center closing “immediately,” resulting “in the loss of critically needed inpatient psychiatric services, visiting real harm, not theoretical competitive harm, on numerous patients and their families.”
Bell did, however, extend a temporary restraining order on the acquisition until June 21 to allow the FTC enough time to seek an injunction from the Fourth Circuit Court of Appeals. The transaction between Novant and CHS was authorized to close on June 12.
While Bell’s rulings may not be indicative of how future FTC enforcement actions play out, it is nonetheless noteworthy during a time when the agency has increased its oversight.
As more mergers take place between hospitals seeking consolidation to weather financial storms, the extent to which the FTC is successful in thwarting deals could significantly affect the long-term plans of health systems.
Jay Asser is the contributing editor for strategy at HealthLeaders.
KEY TAKEAWAYS
U.S. district judge Kenneth Bell has ruled against both preliminary injunction motions by the FTC to block Novant Health’s purchase of two hospitals from Community Health Systems.
In his decisions, Bell stated that the transaction increases competition in an already-concentrated market, while improving the chances of one of the acquired hospitals remaining open.
The FTC was given an extension on its restraining order against the deal though, allowing it more time to appeal the case.