On December 8, 2015, the Federal Trade Commission (FTC) announced that it would seek to block Penn State Hershey Medical Center’s (Hershey) proposed merger with Pinnacle Health System (Pinnacle), alleging that the combination of the two health care providers would substantially reduce competition in the area surrounding Harrisburg, Pennsylvania, and would lead to reduced quality and higher health care costs for the area’s employers and residents.  The FTC, jointly with the Pennsylvania Office of the Attorney General (PA Attorney General), filed a complaint in federal district court on December 9 seeking a preliminary injunction to stop the deal pending an administrative trial. 

Hershey is a 551 bed, not-for-profit health care system in Dauphin County.  Hershey also owns and operates the Penn State Hershey Cancer Institute and the Penn State Hershey Children’s Hospital.  Pinnacle is a not-for-profit three-hospital system in Dauphin County.  Pinnacle operates three acute care hospitals—Harrisburg Hospital, Community General Osteopathic, and West Shore Hospital—with a combined total 610 beds.

According to FTC’s administrative complaint, the combination of the two health care providers would create a “dominant provider” of general acute care inpatient hospital services sold to commercial health plans in the area of south-central Pennsylvania consisting of Dauphin, Cumberland, Perry, and Lebanon counties.  Specifically, the FTC and PA Attorney General claim that the merged entity would control approximately 64 percent of this geographic market, likely leading to increased health care costs and reduced quality of care for more than 500,000 local residents and patients.

FTC’s press release regarding the lawsuit is available here.  

Reporter, John Carroll, Washington, D.C., +1 202 626 2993, jdcarroll@kslaw.com.