The Federal Trade Commission plans to ask a federal judge Wednesday to block Penn State Hershey Medical Center's proposed merger with PinnacleHealth, saying the combination would lead to higher prices and lower healthcare quality in the area.
The FTC, in cooperation with the Pennsylvania attorney general, will seek a preliminary injunction pending an administrative trial.
“The proposed merger would eliminate the significant competition between these hospitals, resulting in higher prices and diminished quality,” said Debbie Feinstein, director of the FTC's Bureau of Competition in a statement Tuesday.
PinnacleHealth and Penn State Hershey said in a statement Tuesday they believe the merger is in the best interests of their community.
“We are extremely disappointed that the FTC does not share the enthusiasm of the many employers, community leaders, private physicians, commercial insurance providers and others who have recognized the benefits of our integration and demonstrated their broad support for it,” the systems said in a statement.
The systems said the merger would create “the depth of services and scale” required to manage the health of distinct populations of patients at the lowest possible cost.
According to the FTC, the merged entity would control about 64% of the south-central Pennsylvania market.
The FTC has been very active in challenging hospital deals since 2007. And the commission has had much success both in court and in getting the parties to abandon their deals before litigation, said Jeff Miles, an antitrust attorney with Ober Kaler.
Any deal that allows merging hospitals to gain more than 40% market share raises concerns, Miles added, and the FTC tends to be particularly interested when merging hospitals compete directly with one another versus with other area hospitals in the area.
Hershey is a 508-bed, not-for-profit health system in Dauphin County that includes a children's hospital. Pinnacle is a not-for-profit, three-campus system with 607 beds, also in Dauphin County. Hershey's total revenue for fiscal 2014 was $1.39 billion and Pinnacle's in fiscal 2015 was $1.07 billion, according to the FTC.
The administrative trial is scheduled to begin May 17, 2016.
The systems said their boards and leadership teams will spend the next several days considering their options.
The announcement Tuesday followed similar news last month that the FTC would seek a preliminary injunction to stop Cabell Huntington (W.Va.) Hospital from acquiring crosstown rival St. Mary's Medical Center if the Catholic Church and state officials allow the deal.
In that complaint, the FTC alleged the merger would create a “near monopoly” in four West Virginia and Ohio counties for acute-care services and outpatient surgeries. Those two hospitals have said they remain committed to their deal.