A federal judge has rejected the Federal Trade Commission's request for a preliminary injunction to bar Winston-Salem, N.C.-based Novant Health from its $320 million acquisition of two North Carolina hospitals from Franklin, Tenn.-based Community Health Systems.
The FTC had sought the injunction in March alleging that Novant Health's proposed acquisition of Mooresville, N.C.-based Lake Norman Regional Medical Center and Statesville, N.C.-based Davis Regional Medical Center from CHS, would "irreversibly consolidate the market for hospital services in the Eastern Lake Norman Area in the northern suburbs of Charlotte."
The commission argued that it should be granted a preliminary injunction by the court for two reasons, the first being that the FTC considers the deal "unlawful … because it would result in a combined entity with an eye-popping 64% share of the market in the Eastern Lake Norman Area." The second is that the planned transaction would remove direct competition between Novant Huntersville and Lake Norman Regional.
Novant countered the FTC's claims are "premised on a distorted and artificially narrow view of healthcare competition in the Charlotte area." Novant also argued that the FTC did not define a relevant market that corresponds to commercial realities and cannot prove that the transaction is likely to substantially reduce competition.
After hearing testimony, North Carolina District Judge Kenneth Bell said in a 55-page ruling issued June 5 that he believes:
- Absent the transaction, Davis Regional Medical Center will close.
- There is no alternative buyer for either hospital.
- Lake Norman Regional is unlikely in the near term to resume services in cardiology, newborn care and oncology because of CHS's decision not to invest in the growth of the hospital.
- Lake Norman Regional's external competitive challenges, particularly the scheduled mid-2025 opening of Atrium Lake Norman and changes in the Certificate of Need process for outpatient facilities, "likely will shortly lead to its closing in light of CHS’ difficult financial position."
"All of this, especially the closure of the hospitals, will reduce rather than enhance competition," the judge wrote. "At most, on its current and expected path, LNR can only hope to maintain its already limited competitive position for a short time. 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.'"
The deal still faces an administrative challenge before the FTC.
Novant Health president and CEO Carl Armato said in a statement shared with Becker's that the court's ruling is a "victory for the area."
"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," he said.
The FTC declined to comment on the judge's June 5 ruling.
The deal between Novant and CHS was announced in March 2023.