Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: FTC brings Penn State hospital, PinnacleHealth merger challenge to appellate court, (May 12, 2016)
Organizations Mentioned:Penn State Hershey Medical Center | PinnacleHealth System
By Greg Hammond, J.D.
The FTC is appealing an order, entered by the federal district court in Harrisburg, Pennsylvania, denying a preliminary injunction against a proposed merger of Penn State Hershey Medical Center and Pinnacle Health System. The Notice of Appeal to the U.S. Court of Appeals in Philadelphia was filed on May 11 (FTC v. Penn State Hershey Medical Center, Dkt. 1:15-cv-02362-JEJ).
Penn State Hershey Medical Center is a 551-bed hospital located in Hershey, Pennsylvania, and is the primary teaching hospital of the Penn State College of Medicine. PinnacleHealth System is a non-profit health system with 646 licensed beds across three campuses. Penn State and PinnacleHealth executed a letter of intent of their proposed merger in June 2014. Following an investigation, in December 2015, the FTC issued an administrative complaint, alleging that the proposed transaction would violate Section 5 of the FTC Act and Section 7 of the Clayton Act by eliminating price competition, increasing the merged entity’s bargaining leverage, and eliminating vital quality competition in the Harrisburg area.
The FTC sought a preliminary injunction to prevent the two hospitals from consummating the merger prior to the FTC’s administrative trial on the merits of the underlying antitrust claims. The district court, however, denied the motion, concluding that the FTC could not establish a likelihood of success on the merits of its antitrust claim against the two hospitals, since the agency failed to set forth a relevant geographic market. The FTC had contended that the relevant geographic market was the Harrisburg metropolitan area and that the market for general acute care services was inherently local since patients want to be hospitalized near their families and homes. This geographic market, however, was too narrowly drawn, according to the court, and did not account for the commercial realities faced by consumers in the region.
Companies: Penn State Hershey Medical Center; PinnacleHealth System
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