The antitrust agency is seeking a preliminary injunction on the sale after previously challenging through a lawsuit.
The Federal Trade Commission (FTC) has put on a full-court press to stop Novant Health’s proposed purchase of two Community Health Systems (CHS) hospitals.
Regulators are taking aim at more M&A of late and the deal between Novant and CHS is the latest case of the FTC trying to make an example out of a transaction for anticompetitive reasons.
The agency filed a request for a preliminary injunction to bar the $320 million sale from continuing, arguing that Winston-Salem, North Carolina-based Novant taking control of Mooresville, North Carolina-based Lake Norman Regional Medical Center and Statesville, North Carolina-based Davis Regional Medical Center “would irreversibly consolidate the market for hospital services in the Eastern Lake Norman Area in the northern suburbs of Charlotte.”
The action comes on the heels of the FTC suing to block the deal in January, almost a year after the proposed acquisition was announced.
The two aspects of the purchase that the FTC is contending are the resulting market share and the removal of direction competition.
According to the agency, the transaction is “unlawful” because it would create an “eye-popping 64% share of the market in the Eastern Lake Norman Area.” The FTC cited that the Supreme Court has previously held mergers presumptively unlawful if any single entity grabs a 30% market share.
Secondly, the FTC alleged that the sale would significantly threaten competition in the area, harming patients in several ways.
“Today, aggressive competition between Novant Huntersville and Lake Norman Regional benefits patients through lower prices, improved quality of care, and new service offerings,” the court documents read. “The proposed transaction would immediately wipe out this competition, reducing Defendants’ incentives to invest in quality and leaving fewer options for patients.”
In response to the FTC’s lawsuit in January, Novant said in a statement that it “will pursue available legal responses to the FTC's flawed position.”
The increased scrutiny of deals is partly due to regulators stepping in to challenge more often, but it’s also because of the M&A climate which is seeing organizations seek out partners at a greater rate and often to alleviate financial struggle.
As more health systems pursue M&A this year and beyond, regulators are likely to continue being heavily involved. However, that shouldn’t stop stressed organizations from being aggressive to work out deals that improve their long-term sustainability.
Jay Asser is the contributing editor for strategy at HealthLeaders.
KEY TAKEAWAYS
In a court filing requesting a preliminary injunction, the Federal Trade Commission alleges that Novant Health’s acquisition of two hospitals from Community Health Systems would “irreversibly consolidate” market share and dimmish competition in the area.
It’s another example of regulators doing what they can to halt a transaction, though hospitals haven’t shown much sign of backing off on dealmaking.