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FTC Wins Stay of Pennsylvania Hospital Merger Pending Appeal in Third Circuit

The Third Circuit granted on Tuesday the Federal Trade Commission’s (“FTC”) request for an injunction pending appeal of the proposed merger between Penn State Hershey Medical Center and Pinnacle Health System. The injunction comes just before the temporary restraining order against the merger issued by the U.S District Court for the Middle District of Pennsylvania was set to expire on Friday.  Earlier this month, the district court denied the government’s request to block the merger.

The government told the Third Circuit that the district court “fundamentally erred by ignoring [the] basic reality of the healthcare marketplace and addressing the wrong question.”  According to the FTC, the relevant question is “whether the direct purchasers—insurers—would pay a higher price to one of defendants’ hospitals,” and not “whether Hershey draws patients from outside the Government’s proposed market and whether those patients could turn to hospitals other than Hershey or Pinnacle.”  “The district court plainly did not engage in this analysis with respect to Pinnacle, which is barely mentioned in the opinion,” the FTC argued.  “The failure to consider price increases at Pinnac[l]e is especially striking in light of the testimony of Hershey’s own CEO, who recognized that insurers were specifically concerned that the merger would allow defendants to raise prices specifically at Pinnacle.”  The FTC also argued that enjoining the merger will not substantially harm the hospitals since there is no deadline for the deal, whereas closing the merger would irreparably harm competition because “[e]ven if the merger could be unwound, there is no way to unring the bell.”

A minor solace for the hospitals in this appeal process, the Third Circuit accepted their proposed expedited appeal schedule rather than the longer schedule suggested by the government.  Per the Third Circuit’s order, briefing must be completed in June and arguments will be held the week of July 25.

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Dionne Lomax