Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Pennsylvania healthcare provider settles AG’s challenge to acquisition of competitor, (Oct 29, 2013)

By Tobias J. Gillett, J.D., LL.M.

Pennsylvania healthcare provider Geisinger Health System Foundation (GHSF) has agreed to settle a challenge by the Pennsylvania Attorney General to its acquisition of Lewistown Health Care Foundation (LHF) over concerns that the transaction would restrict competition for the provision of physician services and inpatient acute care hospital services in Mifflin and Juniata Counties, Pennsylvania, the Attorney General announced yesterday (Commonwealth of Pennsylvania v. Geisinger Health System Foundation, filed October 25, 2013).

In the complaint, filed with the agreed final order in the U.S. District Court for the Middle District of Pennsylvania, the Attorney General contended that the acquisition of LHF and its affiliates, including Lewistown Hospital and Family Associates of Lewistown Hospital, by GHSF, the parent company of five hospitals, a more than 1,000-physician group practice, and a health plan, would be “likely to substantially lessen or eliminate competition in the provision of primary care physician services and primary and secondary inpatient acute care hospital services in Mifflin and Juniata Counties.” The Attorney General also contended that the combination “would reduce the number of competitive alternatives available to health care consumers and enable GHSF to raise prices with no competitive constraint.”

According to the complaint, market shares for primary care physician services in the relevant counties were 39 percent for LHF, 42 percent for GHSF, and 3.8 percent for each of five independent primary care physicians. However, three of the LHF primary care physicians planned to leave LHF after the transaction, but remain practicing in the counties. Therefore, the combined entity would possess almost 70% percent of the primary care physician market. In the primary and secondary inpatient acute care hospital services market, Lewistown Hospital had 63 percent of discharges, while Geisinger Medical Center had 11 percent. The combined entity would thus have about 74 percent of discharges.

The combined entity would be able to use the bargaining leverage derived from the transaction to demand higher reimbursement rates from health plans, thus increasing the overall cost of health care, according to the complaint. The market allegedly had high barriers to entry from the combined entity’s employment of the majority of primary care physicians in the relevant counties, and patients’ loyalties to their existing physicians.

The complaint asserted claims for violations of Section 7 of the Clayton Act and the state common law doctrine against suppression of competition. It sought a declaration that the acquisition violated the antitrust laws, preliminary and permanent injunctions against consummation of the transaction, costs, attorneys’ fees, and any other appropriate relief.

Among other provisions, the final order requires GHSF to maintain the combined Geisinger-Lewistown Hospital (GLH) as a 123-bed acute care hospital, offering substantially the same scope and level of services as Lewistown Hospital for at least eight years. GLH and GHSF’s Geisinger Clinic (GC) must honor all existing Lewistown Hospital payor contracts with health plans until the end of their terms, and future contracts must be negotiated in good faith within a range payable to similar hospitals and clinics, as determined by an independent consultant. GLH and GC must continue GHSF’s practice of not conditioning a contract for services on a health plan’s agreement not to contract with another health care provider. Lewistown Hospital’s primary care physicians can leave Geisinger’s employ up to two years after the merger with no restrictions as to continued practice in Mifflin and Juniata Counties. The order also limits the combined entity’s ability to restrict its staff privileges and requires GLH to continue GHSF’s practice of transferring a patient to a hospital other than a GHSF-affiliated institution if the transfer is requested by the patient, the patient’s representative, or the patient’s physician, and the transfer is medically appropriate and legally permissible.

The Attorney General asserted that the agreement would help preserve health care competition in the region, and thanked GHSF for its cooperation.

“Access and price are most important to consumers when it comes to health care,” said Attorney General Kathleen G. Kane. “Consumers want to be able to see their physicians and obtain quality hospital services locally, regardless of what insurance card they carry in their wallet. They also want reasonable prices for health care services.”

Geisinger and Lewistown statement. GHSF and LHF issued a press release, announcing an effective date of November 1 for the new Geisinger-Lewistown Hospital.

“We are pleased to receive the necessary regulatory approvals and thank the Attorney General and Department of Health for their diligent, constructive, and collaborative review of this transaction,” said GHSF president and chief executive officer Glenn Steele, Jr., M.D. “We welcome the Lewistown Hospital team into the Geisinger family, and look forward to building programs, growing services, improving outcomes and demonstrating value to the people of the Juniata Valley.”

“This is tremendous news for Lewistown Hospital, our patients, staff and area residents,” said Lewistown Hospital president and chief executive officer Kay A. Hamilton. “This merger with Geisinger ensures that a strong, nonprofit health care system focused on patients remains in Lewistown. I, too, thank the Attorney General and Department of Health for their review, as well as the community for its support of our hospital.”

The case is No. 1:13-cv-02647-YK.

Attorneys: Tracy W. Wertz, Chief Deputy Attorney General, for Commonwealth of Pennsylvania. David J. Felicio, Chief Legal Officer, for Geisinger Health System Foundation.

Companies: Geisinger Health System Foundation; Lewistown Health Care Foundation

News: Antitrust PennsylvaniaNews