The Justice Department on Wednesday sued Geisinger Health to prevent it from acquiring part of a competing hospital in central Pennsylvania.
While Danville, Pa.-based Geisinger and Evangelical Community Hospital, an independent hospital in Lewisburg, Pa., have categorized their deal as an "agreement" rather than an acquisition, the Justice Department said the providers won't have the same incentive to compete with each other, and that could raise healthcare prices in the area.
"Preserving competition in healthcare markets is a priority for the Department of Justice because of its important impact on the health and well-being of Americans, Assistant Attorney General Makan Delrahim of the Justice Department's Antitrust Division said in a statement. "This agreement between Geisinger and Evangelical threatens to harm patients in central Pennsylvania by reducing competition that has improved the price, quality, and availability of healthcare in the region."
Geisinger and Evangelical compete over patients in a six-county area of central Pennsylvania. DOJ alleged that Geisinger initially wanted to fully acquire Evangelical, but ultimately the two providers announced their agreement in February 2019. Geisinger took a 30% stake in Evangelical and invested $100 million into the hospital, particularly for specific projects the health system selected, according to the complaint.
"These terms link the two organizations financially and set Geisinger up as a critical source of funding to Evangelical for the foreseeable future," DOJ said in a statement.
The Justice Department said Geisinger has a history of snapping up community hospitals around the state, and the Evangelical deal would lessen competition without leading to community benefits. The federal lawsuit quoted Geisinger documents that said the community hospital would be "tied to us" and prevent them from merging with a competing health system.
Geisinger said Wednesday that it was disappointed in the challenge, citing "overwhelming community support" for the arrangement and a commitment to maintain Evangelical's independence.
"We continue to believe that this collaboration is the best way to make healthcare easier, more affordable and more accessible to Central Pennsylvanians," the health system said in a statement.
Evangelical's CEO, Kendra Aucker, said the hospital will work with its counsel to address the Justice Department's concerns.
"We are disappointed by the decision and continue to believe enhancing our relationship with Geisinger is in the best interest of the region and will provide efficient, cost-effective healthcare to the communities we serve," she said in a statement. "It is important, now more than ever, that patients have accessible and affordable healthcare and this collaboration is the best way to provide those benefits."
Geisinger is an integrated healthcare provider and drew $7.1 billion in revenue in its fiscal 2019, generating a 1.7% operating margin. It unwound its relationship with AtlantiCare in March after initially suing the Egg Harbor Township, N.J.-based provider to prevent it from leaving the Geisinger network.