Judge upholds Pennsylvania merger in rare blow to FTC

In a rare loss for the Federal Trade Commission, a federal judge ruled a merger between two Pennsylvania healthcare providers can proceed.

The FTC challenges a tiny sliver of proposed hospital mergers and nearly always wins, such as in the case of St. Luke's Health System's purchase of Idaho's largest independent physician's practice. In 2015, the FTC took an aggressive line against mergers and acquisitions it perceived as anti-competitive, moving to block other deals in Pennsylvania as well as in Illinois and Virginia even as a wave of consolidation in the wake of the Affordable Care Act continued. Hospital leaders, meanwhile, have argued that such consolidation benefits consumers and reduces costs.

In the most recent case, the FTC argued the proposed merger between Penn State Milton Hershey Medical Center and PinnacleHealth System would give the resulting entity, Penn State Health, 64 percent of Lebanon, Cumberland, Dauphin and Perry counties' hospital markets, according to Lancaster Online.

But Judge John E. Jones III of the Middle District of Pennsylvania argued that the merger will have little effect on competition in light of numerous other recent industry moves. Recent transactions within Pennsylvania's hospital industry, such as Philadelphia-based Penn Medicine's acquisition of Lancaster General Health, were aimed at drawing patients away from Hershey. About 6 percent of Lancaster County residents who were hospitalized last year crossed the county line into Dauphin County to Hershey, according to the article.

Moreover, Jones ruled, Penn State Health would continue to face competition from such providers as WellSpan Health, Community Health Systems and Geisinger Health System.  Moreover, he wrote, the merger would keep Hershey from having to spend $277 million to add 80 new beds, a move which would likely reduce investments in quality improvements or increase charges to patients.

This isn't the last of the case, however. The FTC and the state Attorney General's office have already filed an appeal, according to WITF. The appeal argues that had Jones analyzed the merger differently, he would have seen the potential for price hikes, and that he should have based his ruling on the deal's effect on insurance plans.

To learn more:
- here's the ruling (.pdf)
- read the Lancaster Online article
- here's the WITF article