FTC wins appeal to halt Penn State Hershey/PinnacleHealth merger

Taken from Modern Healthcare, September 27, 2016

A federal appeals court decision Tuesday pausing Penn State Hershey (Pa.) Medical Center’s merger with PinnacleHealth System has placed the Federal Trade Commission’s hospital antitrust review program back on stable ground after a couple concerning losses.

The U.S. Court of Appeals for the 3rd Circuit reversed the FTC’s May loss in the Penn State-PinnacleHealth case, temporarily pausing the proposed merger while the agency takes on administrative review of the case. The 3rd Circuit judges said the lower court ignored the impact of the proposed merger on insurers when it ruled against the FTC, saying its analysis of the FTC’s and Pennsylvania state regulators’ proposed geographic market for the challenge was “economically unsound” and ignored commercial realities in the healthcare market.

Many experts saw the 3rd Circuit reversal as a necessary win for the FTC, according to Bruce Sokler, chair of Mintz Levin Cohn Ferris Glovsky and Popeo PC’s antitrust section. Without this decision, FTC’s hospital antitrust enforcement program could have been in jeopardy after two courts rejected its theories on geographic markets.

“It revives their program,” Sokler said. “It looks to me like the FTC got everything they wanted and needed, and some on top of that.”

The FTC claimed that the Penn State-PinnacleHealth merger would raise prices and lower healthcare quality in the Hershey region. The new entity would control 64% of the south-central Pennsylvania market and 76% of the Harrisburg market, according to the agency’s initial complaint.

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