Justice Department resolves antitrust case against Central Pennsylvania healthcare providers
March 04, 2021
The Department of Justice announced today that it has reached a settlement with Geisinger Health (Geisinger) and Evangelical Community Hospital (Evangelical) that will resolve the department’s ongoing civil antitrust litigation challenging Geisinger’s partial acquisition of Evangelical. Among other terms, the settlement requires Geisinger to cap its ownership interest in Evangelical at a 7.5% passive interest and eliminates additional entanglements between the two competing hospitals.
On Aug. 5, 2020, the Department of Justice Antitrust Division filed a civil antitrust lawsuit challenging Geisinger’s partial acquisition of Evangelical. The department alleged that Geisinger and Evangelical are close competitors for inpatient general acute-care hospital services for patients in a six-county area in central Pennsylvania, where the two hospital systems together account for approximately 70% of the market.
“Now, more than ever, Americans need access to quality healthcare services at affordable prices,” said Richard A. Powers, Acting Assistant Attorney General of the Antitrust Division. “The anticompetitive agreement between Geisinger and Evangelical reduced their incentives to compete on the price, quality, and availability of high-quality healthcare services, which would have harmed patients in central Pennsylvania. Today’s settlement ensures that those patients will continue to benefit from robust competition between Geisinger and Evangelical.”
According to the complaint, the partial-acquisition agreement created significant entanglements between the hospitals, reducing their incentives to compete against each other and increasing the likelihood of harmful coordination. For example, Geisinger was slated to obtain a 30% ownership interest in Evangelical in exchange for providing $100 million to Evangelical for use on projects approved by Geisinger. These terms would have set Geisinger up as a critical source of funding for Evangelical for the foreseeable future and provided opportunities for Geisinger to influence strategic decisions of its competitor. The agreement also gave Geisinger rights of first offer and first refusal for certain transactions and joint ventures, which, in conjunction with other provisions in the agreement, would have made it difficult for Evangelical to partner with other healthcare entities. The department alleged that the provisions of the partial-acquisition agreement functioned together to substantially lessen competition and unreasonably restrain trade in the market for inpatient hospital services in central Pennsylvania.
If approved by the court, the proposed settlement, filed today in the U.S. District Court for the Middle District of Pennsylvania, would resolve the competitive harm alleged in the complaint. The terms of the settlement are intended to prevent Geisinger from exercising any form of control or influence over Evangelical and to restore the defendants’ incentives to compete with each other on both quality and price. In addition to capping Geisinger’s ownership interest in Evangelical, the proposed settlement restricts Geisinger from increasing its ownership interest in Evangelical, making any loan or providing any line of credit to Evangelical, or exerting any control over Evangelical’s expenditure of funds. Defendants are also each required to implement an antitrust compliance program.
While fully addressing the harm threatened by the partial-acquisition agreement, the settlement allows procompetitive aspects of defendants’ proposal to move forward. Specifically, the settlement permits Evangelical to obtain new electronic health records information technology systems and related IT support from Geisinger, enabling Evangelical to upgrade its electronic health records systems and improve the delivery of care to patients in central Pennsylvania. The settlement also requires Evangelical to use the funds associated with Geisinger’s passive investment for specific projects that will benefit patients and the community.
Geisinger is an integrated regional healthcare provider of hospital and physician services in Pennsylvania. It operates 12 hospitals as well as urgent-care centers and outpatient facilities, and owns physician practices throughout Pennsylvania. Its flagship hospital, Geisinger Medical Center, is a 574-bed hospital located in Danville, Pennsylvania. Geisinger Health’s annual revenue in 2019 was approximately $7.1 billion.
Evangelical Community Hospital is a 132-bed independent community hospital in Lewisburg, Pennsylvania. It also operates an urgent-care center and several other outpatient facilities, and owns a number of physician practices in central Pennsylvania. Its annual revenue in 2019 was approximately $259 million.
As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to Eric Welsh, Chief, Healthcare and Consumer Products Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street NW, Suite 4100, Washington, DC 20530. At the conclusion of the 60-day comment period, the U.S. District Court for the Middle District of Pennsylvania may enter the final judgment upon finding it is in the public interest.