On May 9, 2016, a Pennsylvania federal judge denied efforts by the Federal Trade Commission (FTC) and state regulators to block the merger of Penn State Milton S. Hershey Medical Center (Hershey) and Pinnacle Health System (Pinnacle).  On May 10, the FTC filed a motion in the District Court seeking an injunction enjoining the proposed merger—Hershey and Pinnacle could have consummated the merger three days following the FTC’s loss—pending its emergency appeal to the Third Circuit.  The District Court granted a two-week extension, and the Third Circuit is considering the FTC’s appeal.

The District Court’s decision was a significant blow to the FTC. For one, it is the FTC’s first litigated hospital merger loss in more than 15 years.  The District Court also mostly rejected the FTC’s model of assessing competitive harm in hospital mergers, including how the FTC defines the relevant geographic market.  Even more significant, however, was the Court’s analysis of provider consolidation in the context of the Affordable Care Act.  Specifically, the judge stated:

“Our determination reflects the healthcare world as it is, and not as the FTC wishes it to be. We find it no small irony that the same federal government under which the FTC operates has created a climate that virtually compels institutions to seek alliances such as the Hospitals intend here. Like the corner store, the community medical center is a charming but increasingly antiquated concept. It is better for the people they treat that such hospitals unite and survive rather than remain divided and wither.”

Materials related to the litigation are available at the FTC web site by clicking here.

Reporter, John D. Carroll, Washington, D.C., +1 20 626 2993, jdcarroll@kslaw.com.