FTC puts an end to Penn State-PinnacleHealth deal

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Thanks to the Federal Trade Commission, the Penn State Health and PinnacleHealth merger will not go forward.

Plans to merge were called off late last week, according to PennLive.com. The Penn State Board of Trustees voted unanimously to call off the deal, which would have created a four-hospital system in the Harrisburg region, including Penn State's Hershey Medical Center and the three PinnacleHealth facilities.

The FTC and the Pennsylvania Attorney General intervened in the deal late last year, with both claiming that residents in Central Pennsylvania would have few alternatives for other healthcare providers, leaving the likelihood open that the merged entity would raise prices. The transaction was initially approved by a U.S. District Court in May, but the parties were dealt a blow when the ruling was reversed by the U.S. Third Circuit Court of Appeals last month.

The aborted deal cost Penn State an estimated $17.6 million in legal fees and other costs, according to PennLive.

The case is part of what has been heightened scrutiny of recent hospitals deals by both federal and state regulators. In November, the FTC intervened in a deal between two rural hospitals in West Virginia, Cabell Huntington Hospital and St. Mary's Medical Center. The agency recently prevailed in a 2010 case where it intervened in ProMedica's acquisition of St. Luke's Medical Center in Toledo, Ohio. The agency is also fighting a proposed merger between Advocate Health Care and NorthShore University HealthSystem in Chicago, although as in the Penn State matter, it has lost at the lower court level.

FTC Chairwoman Edith Ramirez expressed concern earlier this year that ongoing hospital mergers will soon impact healthcare pricing around the U.S., but deal-making appears to go on unabated. That's despite the fact that a recent analysis suggested that mergers even across markets can lead to double-digit cost increases.