When the Patient Protection and Affordable Care Act1 became law in 2010, one of its major goals was to encourage better quality and more costeffective care across the spectrum of medical services. Since the law’s enactment, we have witnessed unprecedented consolidations among health care providers: hospitals acquiring or merging with other hospitals, the formation of vast health care systems, the development of large physician practices, mergers and acquisitions among managed care plans and health insurers, and other combinations. Ironically, standing in the way of some of these consolidations have been the Antitrust Division of the U.S. Department of Justice, the Federal Trade Commission (FTC), and some state attorneys general, who have expressed concern over the effects of these consolidations on competition in the health care marketplace.
Hospital mergers have become a particular target for antitrust scrutiny. A decision earlier this month from a federal district court in Pennsylvania highlighted this conflict between consolidation and competition, and dealt a blow to the FTC’s effort to stop the merger of two prominent health care systems in the commonwealth.
Background
Penn State Hershey Medical Center is a major academic medical center in Hershey, Pa., and its 551-bed hospital is the primary teaching campus for the Penn State College of Medicine. Hershey offers a broad array of sophisticated high-acuity services, and operates central Pennsylvania’s only specialty children’s hospital, the only heart transplant center outside of Philadelphia and Pittsburgh, and one of three Level 1 trauma centers in Pennsylvania. Pinnacle Health System operates two community hospitals in Harrisburg and one in Cumberland County totaling 646 beds.
In June 2014, Hershey and Pinnacle entered into a Letter of Intent to merge, and their respective boards approved the merger in March 2015. The following month, the hospitals notified the FTC of their proposed merger, and in May 2015 they entered into a Strategic Affiliation Agreement.
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