FTC Obtains Preliminary Injunction in New Jersey Hospital Merger

A United States District Judge for the District of New Jersey recently granted the Federal Trade Commission (“FTC”) a preliminary injunction in the planned merger of Hackensack Meridian Health, Inc. (“HMH”) and Englewood Healthcare Foundation (“Englewood”). The parties are appealing this District Court decision. The FTC alleged the proposed merger would allow the merged entity to control nearly half of inpatient hospital services in the relevant geographic market of Bergen County, New Jersey, resulting in a significant decrease in competition. HMH and Englewood responded that the merger would benefit consumers, and that the relevant geographic market is broader than Bergen County.

The FTC alleged that Englewood is the third largest provider of general acute care services and competes directly with HMH, the largest provider. The FTC further alleged that the merger of these two health systems would allow them to control three of the six general acute care hospitals in Bergen County. The remaining general acute care hospital competitors in Bergen County have considerably smaller market shares. The FTC argued that this loss of competition for inpatient services would result in both commercial insurers and fully-insured employers having fewer systems competing to be included in their networks. These payors would face increased reimbursement rates, and their enrollees would face increases in premiums, co-pays, and deductibles. In addition, the FTC alleged that the merger would lead to a decrease in non-price competition in such areas as quality and services offered.

HMH and Englewood responded by stating that the merger would generate significant pro-competitive effects, including increased access to additional services, quality improvements, and pricing efficiencies to the benefit of the patients they serve. In addition, both HMH and Englewood denied that the geographic market is limited to Bergen County. They argued that it should encompass a broader area, possibly including other hospitals in Northern New Jersey and New York that provide general acute care inpatient services. HMH further argued that there would be no loss in non-price factors, evidenced by the fact that they are currently involved in a large modernization project at one of the relevant hospitals.

Unlike last year’s ruling in the FTC’s challenge of Thomas Jefferson University’s merger with Albert Einstein Healthcare Network, the District Judge appears to have accepted the FTC’s arguments on relevant geographic market and likely competitive harm to payors and consumers. These decisions highlight the continued importance of market-specific facts in merger analyses.

Director Allison Holt has consulted on numerous hospital mergers, in addition to mergers in other industries and other antitrust matters.