Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS—M.D. Pa.: Unredacted complaint ordered in FTC challenge to Pennsylvania hospital merger, (Mar 31, 2016)

By Greg Hammond, J.D.

Noting that a challenge to the proposed hospital merger of Penn State Hershey Medical Center and PinnacleHealth System—brought by the FTC and the Pennsylvania Attorney General—is of “paramount public interest,” the federal district court in Harrisburg, Pennsylvania, has ordered the parties to file a fully-unredacted complaint. The court reasoned that the “strong presumption in favor of untrammeled public access to court records” applies in this action and the two hospital systems failed to overcome this presumption (FTC v. Penn State Hershey Medical Center, March 30, 2016, Carlson, M.).

The FTC and Pennsylvania Attorney General claimed that the combination of Penn State Hersey Medical Center and PinnacleHealth would substantially reduce competition in the area surrounding Harrisburg, Pennsylvania and would lead to reduced quality and higher health care costs for the area’s employers and residents. The complaint sought to enjoin the corporate merger. The court was required to resolve a dispute concerning the extent to which the previously-redacted portion of the complaint should be unsealed.

Although each party sought redactions and argued that some redactions sought by the opposing party were inappropriate, the court concluded that the parties should file a fully unredacted complaint in this matter. “[W]e find that the public’s interest is best served here by complete transparency with respect to the allegations made by the state and United States regarding the community impact of this proposed merger,” the court stated. Further, such transparency “serves to promote trustworthiness of the judicial process, to curb judicial abuses, and to provide the public with a more complete understanding of the judicial system, including a better perception of its fairness.”

In particular, the court noted that the subject matter of this litigation was a matter of “enduring interest to all Pennsylvanians,” because every member of the public would require health care services in their lifetimes. Consequently, litigation concerning issues of competition in this “vitally important marketplace,” and the costs of quality of health care services, was a matter of “paramount public interest,” the court found.

The parties also failed to demonstrate that redaction of the complaint was necessary because they did not carry their dual “burden of showing that the material is the kind of information that courts will protect” and that “disclosure will work a clearly defined and serious injury to the party seeking closure.” Rather, the redacted information consisted largely of a series of fairly commonplace, and commonly understood, free market principles, the court found, including that: (1) major health care providers regarded other major health care providers as their primary competitors in the regional health care marketplace; (2) smaller providers, who offer a lesser array of services, were not viewed as competitive rivals to major providers in this particular marketplace; and (3) health insurers and other consumers of health care services preferred a more competitive marketplace, since it allowed them to shop between competitors and use that competition to secure lower costs for goods and services.

The case is No. 1:15-CV-2362.

Attorneys: Gerald A. Stein, FTC. Adrian Wager-Zito (Jones Day) for Penn State Hershey Medical Center and PinnacleHealth System.

Companies: Penn State Hershey Medical Center; PinnacleHealth System

Cases: AcquisitionsMergers Antitrust PennsylvaniaNews