FTC heads to trial to stop Hershey-Pinnacle merger: 3 things to know

The administrative federal trial that will determine whether Penn State Milton S. Hershey (Pa.) Medical Center and Harrisburg, Pa.-based PinnacleHealth System merge got underway on Monday.

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 health systems.

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.

Here are three takeaways from the first day of the trial over the merger.

1. The FTC argued the systems are exaggerating the need for more beds. Through the proposed merger, the systems claim Hershey will shift some patients to Pinnacle hospitals and avoid the need to build a $276 million patient tower. However, the FTC argued Hershey's capacity needs are not as great as the systems claim, and there are less expensive ways to solve the issue, according to PennLive.

2. Hershey-Pinnacle claim the merger is not about raising insurer rates. The FTC argued insurers would be forced to meet Hershey-Pinnacle's requests for higher reimbursements if the merger goes through. The systems contend the merger has nothing to do with raising rates. Instead, they say the deal is about attaining efficiencies and fending off encroachment from systems outside the immediate area.

3. The parties disagree on what the relevant market is. The FTC claims the level of hospital competition in Dauphin, Cumberland, Perry and Lebanon counties should be considered for antitrust review. However, Hershey-Pinnacle contends major competitors exist outside of those counties, such as Danville, Pa.-based Geisinger Health System, according to the report.

More articles on antitrust issues:

NorthShore lawyer: Why doesn't FTC include Northwestern in definition of Chicago's competitive market?
FTC suspends challenge of West Virginia hospital merger
Antitrust lawsuit against Premier Health heads back to lower court

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