PHILADELPHIA — Last month, the U.S. Court of Appeals for the Third Circuit granted the Federal Trade Commission’s (FTC) request for an injunction pending its appeal in the proposed merger between Pinnacle Health System and Penn State Hershey Medical Center.

In 2014, Hershey Medical Center and Pinnacle entered their intent to combine assets. The FTC filed an administrative complaint to block the merger, and it joined with the Pennsylvania Office of the Attorney General to file a complaint in the U.S. District Court for the Middle District of Pennsylvania to halt the merger.

Earlier in May, the district court denied the FTC’s request to block the merger. The FTC appealed to the Third Circuit and was granted an injunction. 

The FTC argues that once the merger goes through, the merged entity would control almost 80 percent of the market. The hospitals hold that they must merge to remain competitive in the marketplace.

“Once the parties merge, it’s hard to unscramble the egg.” Dionne Lomax told the Pennsylvania Record.

Lomax, an attorney with Mintz Levin, has been following the case because she is involved with antitrust litigation, specifically in the health care industry.

“The job of the FTC is make sure proposed transactions don’t substantially limit competition. (In this case), there is concern that the rates might be raised to anti-competitive rates,” she said.

The judge agreed to the stay “because it’s a matter of equity and fairness” to consumers, insurers and the hospitals. It’s standard operating procedure.”

The Third Circuit gave an expedited schedule to the parties. Briefings must be completed in June, with arguments to be held during the week of July 25.

“It’s really hard to know how long the Court will take to give its decision. I can’t imagine the Court taking that long after granting expedited schedules, but it could be three to four weeks or four to six weeks.”

If the Third Circuit agrees to let the merger go through, the FTC could proceed administratively, but Lomax doesn’t believe that it would continue to fight the merger. The political climate right now does not favor continued challenges by the FTC and Department of Justice Antitrust Division (DOJ), he said.

Federal lawmakers have been considering a proposal, “Standard Merger and Acquisition Reviews Through Equal Rules Act of 2015” or “SMARTER Act” since last year. Currently, the FTC and DOJ have authority to review proposed mergers and acquisitions. Each agency has different standards in court and different administrative processes that determine how they proceed in each transaction.

The SMARTER Act eliminates disparities between the FTC and Department of Justice when it comes to mergers and acquisitions. Companies will face the same standards and processes no matter which federal agency is reviewing the merger.

The SMARTER Act passed the House in March and was received by the Senate in April. It has been referred to the Committee on the Judiciary. Although it is not a law, it could affect how the FTC proceeds with the Pinnacle/Hershey merger.

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