FTC Continues Focus on Healthcare Transactions with Penn State Hershey Merger

FTC Continues Focus on Healthcare Transactions with Penn State Hershey Merger


Continuing its active review of healthcare transactions, on December 8, the Federal Trade Commission authorized an administrative action to block Penn State Hershey Medical Center’s proposed merger with PinnacleHealth System, alleging that the combination of the two healthcare providers would substantially reduce competition in the Harrisburg, Penn. area.  The FTC alleged that such reduced competition would likely lead to reduced quality and higher healthcare costs for the area’s employers and residents.   

The FTC also authorized staff to seek a temporary restraining order and a preliminary injunction in federal court to prevent the parties from consummating the transaction, pending the results of the administrative proceeding. The administrative trial is scheduled to begin on May 17, 2016. The Pennsylvania Office of Attorney General will join the FTC in the federal court complaint.  The federal district court complaint is expected to be filed today in the U.S. District Court for the Middle District of Pennsylvania.

The FTC has alleged that the proposed merger would create a dominant provider of general acute care inpatient hospital services in south-central Pennsylvania, including Dauphin, Cumberland, Perry, and Lebanon counties. According to the administrative complaint, the surviving entity would control approximately 64% of the market for general acute care services, likely leading to increased healthcare costs and reduced quality of care.

Hershey is a 551-bed, not-for-profit health care system in Dauphin County. Hershey also owns and operates the Penn State Hershey Cancer Institute and the Penn State Hershey Children’s Hospital. Pinnacle is a not-for-profit three hospital system in Dauphin County.  Pinnacle operates three acute care hospitals, Harrisburg Hospital, Community General Osteopathic and West Shore Hospital with a combined total 610 beds.

This has been a busy year for the FTC as they continue to increase their focus on mergers involving healthcare providers. This follows the FTC’s announcement last month that it would seek a preliminary injunction to stop Cabell Huntington Hospital from acquiring crosstown rival St. Mary’s Medical Center. 

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