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FTC Wins Stay of Pennsylvania Hospital Merger Pending Appeal in Third Circuit

The Third Circuit granted on Tuesday the Federal Trade Commission’s (“FTC”) request for an injunction pending appeal of the proposed merger between Penn State Hershey Medical Center and Pinnacle Health System.  The injunction comes just before the temporary restraining order against the merger issued by the U.S District Court for the Middle District of Pennsylvania was set to expire on Friday.  Earlier this month, the district court denied the government’s request to block the merger.

The government told the Third Circuit that the district court “fundamentally erred by ignoring [the] basic reality of the healthcare marketplace and addressing the wrong question.”  According to the FTC, the relevant question is “whether the direct purchasers—insurers—would pay a higher price to one of defendants’ hospitals,” and not “whether Hershey draws patients from outside the Government’s proposed market and whether those patients could turn to hospitals other than Hershey or Pinnacle.”  “The district court plainly did not engage in this analysis with respect to Pinnacle, which is barely mentioned in the opinion,” the FTC argued.  “The failure to consider price increases at Pinnac[l]e is especially striking in light of the testimony of Hershey’s own CEO, who recognized that insurers were specifically concerned that the merger would allow defendants to raise prices specifically at Pinnacle.”  The FTC also argued that enjoining the merger will not substantially harm the hospitals since there is no deadline for the deal, whereas closing the merger would irreparably harm competition because “[e]ven if the merger could be unwound, there is no way to unring the bell.”

A minor solace for the hospitals in this appeal process, the Third Circuit accepted their proposed expedited appeal schedule rather than the longer schedule suggested by the government.  Per the Third Circuit’s order, briefing must be completed in June and arguments will be held the week of July 25.

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About this Author

Dionne Lomax, Antitrust and Trade Attorney, Mintz Levin Law Firm

Dionne’s antitrust and trade regulation practice includes counseling and representation in connection with merger and nonmerger related activities, litigation, and matters before the US Department of Justice (DOJ) and the Federal Trade Commission (FTC). Dionne has been involved in antitrust matters spanning a broad range of industries, but has particularly deep experience in the health care and energy sectors.

In the health care industry, Dionne has represented large health systems, major medical associations, large multi-specialty physician groups, pharmaceutical companies, and...

Farrah Short, Mintz Levin Law Firm, Washington DC, Health Care, Corporate Law Attorney
Special Counsel

Farrah advises on all aspects of antitrust and competition law, including merger review, competitor collaborations, government investigations, private class action litigation, and general antitrust compliance.

Farrah specializes in counseling clients through the Hart-Scott-Rodino (HSR) merger review process at the U.S. Federal Trade Commission and the U.S. Department of Justice, including responding to Second Requests and providing substantive antitrust risk analysis for strategic acquisitions. She has obtained antitrust clearance for major, multi-billion dollar transactions in a variety of industries.  Farrah also regularly advises on HSR reporting triggers for securities investors and provides strategic advice for non-reportable transactions with significant competitive implications.

She also has significant experience counseling clients on a wide range of other antitrust compliance issues, including information exchanges, competitor collaborations, joint ventures, licensing deals, exclusive dealings, and the creation of internal antitrust compliance programs.  In addition, Farrah represents clients in state antitrust investigations, and provides guidance on navigating ex-U.S. merger control requirements.

Outside of her antitrust practice, Farrah serves as chief outside counsel to the National Network to End Domestic Violence.  She also actively supports the firm’s pro bono program, representing indigent clients in immigration matters, including successful asylum and U visa applications. She previously served as chief outside counsel for a nonprofit that provides need-based education scholarships for the families of U.S. military personnel.