Federal judge denies FTC's bid to block Novant Health's acquisition of hospitals
“Overall, the public interest is best served by Novant being permitted to own and operate LNR and Davis, pending the conclusion of the FTC administrative process,” wrote U.S. District Judge Kenneth Bell of the Western District of North Carolina.
A federal judge has denied the Federal Trade Commission’s bid to block Novant Health Inc.’s $320 million acquisition of two hospitals while the proposed purchase goes through the FTC’s administrative process, saying that delaying the merger would not be in the public interest.
“The Court may not simply rubber stamp the FTC’s request for an injunction upon the showing of a mere possibility that the antitrust laws will be violated,” U.S. District Judge Kenneth Bell of the Western District of North Carolina wrote in his order Wednesday.
“Instead, the Court must exercise its independent judgment to determine where the public interest lies, considering whether the FTC is likely to ultimately succeed and whether the equities support issuance of the requested injunction,” Bell added. “Overall, the public interest is best served by Novant being permitted to own and operate LNR and Davis, pending the conclusion of the FTC administrative process.”
In January, the FTC sued to block Novant Health’s proposed acquisition of Lake Norman Regional Medical Center and Davis Regional Medical Center from Community Health Systems Inc., claiming the deal would result in higher prices for patients and reduce incentives to invest in quality care.
Bell stated that Davis would close without the deal and no plausible alternative buyer exists for either LNR or Davis. Community Health Systems has not invested in LNR, Bell added.
“All of this, especially the closure of the hospitals, will reduce rather than enhance competition,” Bell wrote.
“At most, on its current and expected path, LNR can only hope to maintain its already limited competitive position for a short time,” Bell added. “Therefore, the proposed merger carries at least as much likelihood of competitive benefits as it does competitive harm and the FTC is unlikely to ultimately be successful in proving that the transaction may ‘substantially lessen competition.’”
Thus, “having weighed the equities and considering the Commission’s likelihood of ultimate success, the Court concludes that entry of an injunction pending the conclusion of the FTC’s administrative process would not be in the public interest,” Bell wrote. “The FTC’s Complaint will be denied and the purchase of LNR and Davis by Novant allowed to proceed.”
The FTC declined to comment on Bell’s ruling.
Novant Health President Carl Armato hailed the judge’s order.
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“We are thrilled that the federal court recognized the additional benefits Novant Health will bring to the people served by Lake Norman and Davis Regional Medical Centers,” Armato said in a statement Wednesday. “We’re eager to welcome the Lake Norman and Davis facilities into the Novant Health network, and we look forward to not only restoring healthcare services the area has lost, but also bringing our renowned safety and quality excellence to the community.”
Bell’s order came as the FTC and the Department of Justice’s Antitrust Division have been intensely critical of mergers and acquisitions in the health care industry.
Last year, the agencies released merger guidelines indicating they are leery of vertical mergers and roll-up strategies, as well as their effect on the labor market. Such supply-chain purchases and acquisitions of smaller companies have been prevalent in health care, the agencies have said.