DOJ sues to block Geisinger Health deal with Evangelical Community Hospital

DoJ
The Department of Justice sued to block a partial acquisition by Geisinger Health’s of Evangelical Community Hospital alleging the deal would raise antitrust concerns. (Getty Images)

The Department of Justice sued to block "a partial acquisition" of Evangelical Community Hospital by Geisinger Health, alleging the deal would raise antitrust concerns.

Specifically, the DOJ said in a release the department believes the agreement would raise the likelihood of coordination and reduce their incentives to compete aggressively against each other.

"As a result, the transaction is likely to lead to higher prices, lower quality, and reduced access to high-quality inpatient hospital services for patients in central Pennsylvania," the DOJ said in a release.

The lawsuit was filed in the U.S. District Court for the Middle District of Pennsylvania. 

In an era of consolidation, health systems have been seeking unique partnership arrangements rather than outright mergers and acquisitions. In 2019, Geisinger and Evangelical announced they finalized a deal they called "a groundbreaking agreement." 

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That agreement, they said, would strengthen the relationship between Evangelical and the $7.1 billion Geisinger Health System while allowing the 132-bed Lewisburg-based Evangelical to maintain independence.

As Geisinger and Evangelical described the deal in a release in 2019, the organizations agreed to invest $265 million over five years "to enhance the health of their shared communities." Evangelical would be able to take advantage of Geisinger’s IT innovations and have an improved status with Geisinger Health Plan, officials said.

Geisinger would appoint 30% of Evangelical’s Board members while Evangelical would appoint one member to the Geisinger Health Plan Board.

However, the DOJ said the deal would stymie competition. They said Geisinger and Evangelical are close competitors for inpatient general acute-care services for patients in a six-county area with the two hospitals accounting for 71% of the market there. 

The complaint alleges Geisinger has a history of acquiring community hospitals in Pennsylvania and initially sought to acquire Evangelical in full.

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"Defendants recognized, however, that such an acquisition would likely violate the antitrust laws," the DOJ wrote in a release. "Instead, on February 1, 2019, Geisinger and Evangelical entered into a partial-acquisition agreement, in part, to avoid antitrust scrutiny." 

For example, they said, the agreement gives Geisinger a 30% ownership interest in Evangelical and requires it to invest $100 million in Evangelical, much of which is earmarked for specified projects approved by Geisinger. The agreement also gave Geisinger rights of first offer and first refusal for certain transactions and joint ventures, which, in conjunction with other provisions in the agreement, make it difficult for Evangelical to partner with other healthcare entities, the DOJ said.

“Preserving competition in healthcare markets is a priority for the Department of Justice because of its important impact on the health and well-being of Americans,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division in a statement. “This agreement between Geisinger and Evangelical threatens to harm patients in central Pennsylvania by reducing competition that has improved the price, quality, and availability of healthcare in the region.”

Officials at Geisinger said they were "disappointed" with the DOJ's decision to pursue the suit. 

"We are disappointed in the Department of Justice decision to challenge our collaboration with Evangelical Community Hospital, especially given the overwhelming community support and the importance of Evangelical remaining a vibrant, independent community hospital," officials said in a statement. "We continue to believe that this collaboration is the best way to make healthcare easier, more affordable and more accessible to Central Pennsylvanians."

In a statement, Kendra Aucker, President and CEO, Evangelical Community Hospital said it would work with legal counsel to address issues raised in the complaint. 

"We are disappointed by the decision and continue to believe enhancing our relationship with Geisinger is in the best interest of the region and will provide efficient, cost-effective healthcare to the communities we serve," Aucker said. "It is important, now more than ever, that patients have accessible and affordable healthcare and this collaboration is the best way to provide those benefits."

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