DOJ moves to block Geisinger Health’s tie-up with Evangelical Community Hospital

Dive Brief:

  • The U.S. Department of Justice is seeking to block Geisinger Health’s partial acquisition of Evangelical Community Hospital in central Pennsylvania, according to a lawsuit filed in federal court on Wednesday.
  • DOJ alleges the two are close competitors in a six-county area and control 71% of the hospital market there, and a merger would harm patients by reducing competition and increasing prices while lowering quality.
  • Geisinger and Evangelical opted for a partial acquisition, giving Geisinger 30% ownership, in an attempt to avoid antitrust scrutiny. Geisinger said it’s disappointed DOJ decided to challenge the tie-up. “We continue to believe that this collaboration is the best way to make healthcare easier, more affordable and more accessible to Central Pennsylvanians,” the system said in a statement.

Dive Insight:

Health systems have continued to swell in size and a majority of metropolitan areas across the country have highly concentrated hospital markets with few competitors.

Research has shown that when hospitals merge, prices tend to rise. Yet, hospital consolidation has continued at a rapid pace.

DOJ argues Geisinger has a history of acquiring community hospitals — and getting ensnared in antitrust challenges.

In this instance, DOJ alleges that Geisinger acquired Evangelical to stave off potential competition. In 2017, Evangelical announced it was looking for a potential buyer or strategic partner.

“This announcement raised concerns for Geisinger, which had long feared that Evangelical could partner with a hospital system or insurer to compete even more intensely with Geisinger. A more effective competitor could put Geisinger’s revenues at risk,” the petition alleges.

After diving into negotiations, the two realized an acquisition would raise red flags in terms of antitrust. So, they settled on a partial acquisition and in exchange for 30% ownership, Geisinger would invest $100 million in Evangelical. But the $100 million is “not without strings,” according to the DOJ, and it fundamentally alters their relationship and ends any competition.

Geisinger operates 12 hospitals throughout Pennsylvania and New Jersey, along with a health plan, and generates revenue of more than $7 billion.

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