A Pennsylvania federal judge ruled Monday that the Federal Trade Commission and state regulators cannot halt the merger of Penn State Milton S. Hershey (Pa.) Medical Center and Harrisburg, Pa.-based PinnacleHealth System for an administrative challenge.
Penn State Hershey Medical Center and PinnacleHealth announced their merger plan last June. In December, the FTC and Pennsylvania Attorney General Kathleen Kane objected to the proposed integration of the two organizations.
In the complaint opposing the transaction, the FTC and the attorney general said the merged entity would control approximately 64 percent of the hospital market in Dauphin, Cumberland, Perry and Lebanon counties, which would likely lead to increased healthcare costs and reduced quality of care for local residents.
During a week-long trial in April, Pinnacle and Hershey argued the deal is about attaining efficiencies and fending off encroachment from systems outside the immediate area. Antitrust regulators argued the combined entity would have a monopoly and that insurers would be forced to meet Hershey-Pinnacle's requests for higher reimbursements if the merger goes through.
The parties also disagreed on the relevant market for merger review. The FTC claimed the level of hospital competition in Dauphin, Cumberland, Perry and Lebanon counties should be considered for antitrust review. However, Hershey-Pinnacle contended major competitors exist outside of those counties, such as Danville, Pa.-based Geisinger Health System.
On Monday, Judge John E. Jones III issued a 26-page ruling, denying the FTC's motion for a preliminary injunction. The judge found that the FTC failed to meet its burden to show it was likely to ultimately succeed on the merits of its antitrust claim.
"The patients of Hershey and Pinnacle stand to gain much from a combined entity that is capable of competing with a variety of other merged and already growing hospital systems in the region," Judge Jones wrote in his decision, according to the Central Penn Business Journal.
With the preliminary injunction denied, the FTC and attorney general could withdraw their legal challenge or continue to fight the transaction by appealing the judge's order.
In the meantime, Pinnacle and Hershey said they will continue to work toward the merger.
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