Novant Health is throwing in the towel on its $320 million plan to purchase two Community Health Systems hospitals after the Federal Trade Commission (FTC) scored an injunction on the deal from an appellate court.
On Tuesday, the U.S. Court of Appeals for the Fourth Circuit granted the dogged regulator's motion for an injunction pending appeal of the green light given by U.S. District Judge Kenneth Bell earlier this month.
The injunction would keep the health systems from consummating their deal until the conclusion of an appeal process that could span over two years.
That delay and uncertainty was too much for Novant, which had announced the transaction in early 2023 and has been fighting the regulator's objections since January.
"Novant Health has worked tirelessly for more than a year to create a path forward for Lake Norman Regional Medical Center and Davis Regional Medical Center," a spokesperson for the nonprofit system told Fierce Healthcare in a Tuesday email. "Despite our vision to restore services the area has lost and deliver high quality, remarkable care, we have been met with opposition from the Federal Trade Commission at every step.
"We are steadfast in our belief that these facilities and their patients would have greatly benefited from joining Novant Health, but with the FTC’s continued roadblocks we do not see a way to finalize this transaction. The communities served by these facilities deserve better than the fate they’ve been dealt by the FTC so we will look for other ways to support patients and clinicians in these communities," the spokesperson said.
The hospitals in question were the 123-bed Lake Norman Regional Medical Center and the 146-bed Davis Regional Medical Center, both in North Carolina.
Legal arguments from the health systems, regulator and other major stakeholders had disputed whether the purchases would decrease competition by bolstering the region’s second largest healthcare provider (behind Atrium Health), or maintain “struggling” healthcare facilities likely to face crushing competition amid Atrium Health’s plans to open a new 30-bed hospital nearby. Bell, the district judge, had leaned toward the latter.
Despite ultimately dooming the transaction, the three-judge panel's Tuesday decision was not unanimous.
Alongside the order Circuit Judge J. Harvie Wilkinson wrote that he would have denied the request and shared the lower court's concern that Davis Regional Medical Center was likely to close without a sale.
"Sending this back to the FTC and the administrative law judge is a process that ordinarily takes over two years," Wilkinson wrote. "Given the evidence I am not sure any financially hard-pressed healthcare facility would have that amount of time."
Wilkinson wrote that were the proposed deal "a merger between two behemoths, I would feel differently." He added that "the FTC is acting too aggressively in this case, forgetting there is such a thing as a vibrant private sector."
Last week Bell denied the regulator an injunction it requested to block the deal pending an appeal. However, the district judge did push back the deal's close date to at least June 21 to give the FTC time to bring a similar request to the appellate court—ultimately paving the way for Tuesday's injunction pending appeal.
Novant Health reported total operating revenues of $8.3 billion and an operating income of $146.8 million in fiscal 2023. It has 19 medical centers, more than 700 medical group clinics and records 6.7 million annual patient encounters.
Just earlier this month, Novant said that it was "eager to welcome" the facilities into its network and looked forward to "not only restoring healthcare services the area has lost, but also bringing our renowned safety and quality excellence to the community.”