FTC's lawsuit can put the brakes on N.J. hospital merger - 3rd Circ

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The Federal Trade Commission headquarters in Washington, D.C., U.S. REUTERS/Andrew Kelly
  • Hackensack Meridian seeks to buy Englewood Healthcare for $400 mln
  • FTC says 2019 deal gives Hackensack too much control over local market

(Reuters) - The Federal Trade Commission offered more than enough evidence to temporarily block New Jersey’s largest hospital system from buying a smaller competitor, a federal appeals court held Tuesday.

The 3rd U.S. Circuit Court of Appeals affirmed a lower-court order that enjoined Hackensack Meridian Health and Englewood Healthcare Foundation from completing their $439 million merger, announced in 2019, while the agency’s administrative complaint is pending.

Since Hackensack Meridian already owns two of Bergen County, N.J.’s six hospitals, purchasing Englewood would give it a 47 percent market share and allow it to raise prices by an estimated $31 million, the FTC estimated.

U.S. District Judge John Michael Vazquez in Newark ruled last August that the FTC was likely to prevail on its claim that the merger would violate the Clayton Act, a federal antitrust law that bars acquisitions that may “substantially…lessen competition” or “tend to create a monopoly.”

Vazquez’s ruling was supported on appeal by attorneys general of about two dozen states, who argued that consolidation in the healthcare industry has affected both prices and the quality of patient care.

However, the hospitals and several healthcare associations, in amicus briefs, argued that Vazquez failed to consider all the benefits the merger would bring, and the fact that the New Jersey Health Department and New Jersey Attorney General’s office had approved the deal.

“Some procompetitive benefits may exist, but they are not significant enough to offset the likely anticompetitive effects of the merger,” Senior Circuit Judge D. Michael Fisher wrote for the panel.

While Vazquez should have considered the state’s assessment of public interest, the “modest quality improvements and upgrades likely to occur because of this merger… are not significant enough to overcome the FTC’s strong prima facie case,” Fisher wrote, joined by Circuit Judges Patty Shwartz and David Porter.

Attorneys and spokespeople for the hospitals did not immediately respond to requests for comment.

The FTC, which will hold an administrative trial in the case next month, hailed the 3rd Circuit’s ruling.

“Today’s win affirms the FTC’s consistent position: that patients and their families in Bergen County, New Jersey, would be poorly served by this anticompetitive merger,” John Newman, deputy director of the FTC’s Bureau of Competition, said in a statement. “Had it been allowed to proceed, patients would have been left with fewer alternatives for inpatient general acute care services, which likely would have driven up prices and diminished the quality of care available in the area.”

The case is FTC v. Hackensack Meridian Health, Englewood Healthcare Foundation, 3rd U.S. Circuit Court of Appeals No. 21-2603.

For FTC: Mariel Goetz and Jonathan Lasken of the FTC

For Hackensack Meridian: Aaron Van Oort and Paul Saint-Antoine of Faegre Drinker Biddle & Reath

For Englewood Healthcare: Jeffrey Kessler and David Dahlquist of Winston & Strawn; James Bucci of Genova Burns

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