Appeals court halts PinnacleHealth-Penn State Hershey merger

A federal appeals court ruled Tuesday that a proposed merger between Penn State Hershey (Pa.) Medical Center and Harrisburg, Pa.-based PinnacleHealth System should be halted.

Penn State Hershey Medical Center and PinnacleHealth announced their merger plan last June. In December, the Federal Trade Commission 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 insurers would be forced to meet Hershey-Pinnacle's requests for higher reimbursements if the merger goes through.

In May, 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 FTC appealed the ruling. 

On Tuesday, the U.S. Court of Appeals for the Third Circuit issued a decision that reversed Judge Jones' ruling. Under the decision issued by the three-judge appeals panel, the lower court will issue an injunction preventing the Pinnacle-Hershey merger from moving forward pending the outcome of an administrative hearing on the transaction. 

The FTC's Bureau of Competition Director Debbie Feinstein said the FTC is pleased with the ruling from the appeals court. "We look forward to proving our case," she said.

Pinnacle and Hershey issued a joint statement saying they are disappointed with the ruling and are considering their next course of action.

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