Appeals court blocks approval of Pennsylvania hospital merger

In a win for the Federal Trade Commission, a federal appeals court has ruled in favor of a preliminary block of a Pennsylvania hospital merger.

The Third U.S. Circuit Court of Appeals this week overturned an earlier ruling allowing a proposed merger between Penn State Hershey Medical Center and Pinnacle Health System. The May ruling represented a rare setback for federal regulators in what has become a campaign of increased scrutiny of healthcare mergers that could potentially threaten competition.

In its ruling, the court claimed the earlier decision erred in its assessment of how the merger would affect the local hospital market. Under the new ruling, the FTC will have the chance to hold a full antitrust trial within an administrative court run by the commission, according to The Wall Street Journal. Preliminary injunctions such as the one imposed by the decision often prompt deal participants to abandon the transaction rather than endure the long, expensive litigation process.

The court also rejected Hershey and Pinnacle’s argument that they would abandon the transaction if the court granted an injunction. “We see no reason why, if the merger makes economic sense now, it would not be equally sensible to consummate the merger following a FTC adjudication on the merits that finds the merger lawful,” the ruling said.

“The FTC is very pleased with today’s ruling from the Third Circuit Court of Appeals, which found that we have a likelihood of success on the merits. We look forward to proving our case,” Debbie Feinstein, director of the FTC’s Bureau of Competition, said in a statement.