Recent Department of Justice Health Care Enforcement Action

Arnall Golden Gregory LLP

The Department of Justice’s (DOJ) Antitrust Section recently filed a lawsuit to enjoin the partial acquisition between Geisinger Health (Geisinger) and Evangelical Community Hospital (Evangelical). Geisinger had agreed to acquire a 30% interest in Evangelical in exchange for a pledge to provide $100 million to Evangelical for investment projects and intellectual licensing.

In light of the nature of the deal, the parties did not file with the Government under Hart-Scott-Rodino.  Notwithstanding, DOJ became aware of the transaction, and focused on the provision of acute services in central Pennsylvania.

DOJ, Federal Trade Commission, and State Attorney General offices have historically been aggressive in the health care antitrust area. Generally, these types of transactions are challenged by the Government under Section 7 of the Clayton Act. However, in this instance, DOJ also brought a claim under Section 1 of the Sherman Act.

The concerns raised by DOJ in their Complaint involved the fact that the defendants were “close competitors” in providing inpatient general acute-care services to patients in a six-county area in central Pennsylvania. DOJ alleged that the parties structured the deal in this fashion to avoid an antitrust challenge. DOJ was concerned about the sharing of competitively sensitive information between the parties. In addition, the acquisition, according to DOJ, could lead to increased prices to commercial insurers and other purchasers of inpatient acute care services as well as consumers.  Together, according to DOJ economists, the parties would account for 71% of the general acute services market in the relevant market.

Further, DOJ raised an allegation of a “no-poach” agreement where the parties indicated they would not hire each other’s employees. DOJ has indicated in the past they would pursue “no-poach agreements” either criminally or civilly under the Sherman Act.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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