Penn State Hershey Medical Center, PinnacleHealth drop merger plans

Penn State Hershey Medical Center and PinnacleHealth have abandoned plans to merge following a September 27 decision in U.S. District Court that granted an injunction against the integration of the two systems.

The injunction allowed both the Federal Trade Commission and the Pennsylvania Attorney General to probe further into the deal, including alleged anti-competitive ramifications if the merger would have gone through.

"The parties' decision to abandon this transaction preserves hospital competition in the Harrisburg area," said Debbie Feinstein, Director of the Federal Trade Commission's Bureau of Competition. "Had it been consummated, the merger would have likely led to lower quality and higher cost health care, at the expense of Harrisburg residents and their employers."

[Also: Appeals court blocks Penn State Hershey Medical Center-PinnacleHealth merger]

Both systems expressed disappointment in the court's decision, and cited the mounting time and costs associated with litigation as the reason for walking away from the merger plan.

"While we pursued plans for our integration, PinnacleHealth and the Hershey Medical Center enjoyed a positive and collaborative working relationship. Where circumstances allow and where it makes the most sense for our patients, we will continue to collaborate in the future," the systems said in a joint statement.

In early May, things seemed to be moving in the direction of the merger when U.S. District Court Judge John Jones denied the request by the AG and FTC for an injunction to prevent the two health systems from coming together. Jones said the hospitals' five-year contract with Highmark and Capital Blue Cross which required the providers to maintain the existing rates in fee-for-service contracts and to preserve the existing rate differences between the hospitals were influential.

[Also: FTC will appeal Pennsylvania decision allowing hospital merger]

"The court finds it extremely compelling that the hospitals have already taken steps to ensure that post-merger rates do not increase with CBC and Highmark, central Pennsylvania's two largest payors, representing 75-80 percent of the hospitals' commercial patients," Jones said.

The late September court decision to reverse that decision and grant an injunction against the merger dealt a crushing blow to the systems' plans.

PinnacleHealth System is a 636-bed system in central Pennsylvania that has three acute care hospitals on four campuses serving a five-county service area. Penn State Hershey Medical Center houses 548 licensed beds in their Hershey, Pennsylvania facility.

Twitter: @BethJSanborn