On March 3, 2021, DOJ filed a proposed settlement to resolve its lawsuit challenging Geisinger Health’s (Geisinger) partial acquisition of Evangelical Community Hospital (Evangelical). DOJ filed a complaint against the two hospital systems (collectively, the Defendants), both located in central Pennsylvania, in August 2020, alleging the partial acquisition agreement (the Agreement) created substantial financial entanglements and reduced the hospitals’ incentives to compete aggressively.

The proposed settlement, which is subject to court approval and public comments under the Tunney Act, mitigates DOJ’s antitrust concerns by imposing several conditions, such as:

• Defendants cannot appoint members to one another’s Boards of Directors;

• Geisinger’s ownership interest in Evangelical must not exceed 7.5% (down from a 30% interest in Evangelical under the original Agreement terms);

• Geisinger must not make any additional financial contribution to Evangelical (Geisinger would have given Evangelical $100 million in exchange for the 30% interest under the original terms of the Agreement);

• Geisinger must not influence Evangelical’s expenditure of funds;

• Geisinger must not influence Evangelical’s decision-making or provide a financial guaranty to Evangelical; and

• Defendants must implement firewalls to prevent sharing of competitively sensitive information.

The proposed settlement allows Evangelical to use funds it already received from Geisinger for certain projects that improve the quality of care in central Pennsylvania. In addition, Evangelical is permitted to use Geisinger’s electronic medical record systems and related technology.

This lawsuit signals that DOJ may continue to focus on partial acquisitions or minority interests in the healthcare space. The DOJ press release is available here.