Hackensack Meridian Health and Englewood Health appeal FTC merger challenge

Photo: Hackensack Meridian Health

Hackensack Meridian Health and Englewood Health, two New Jersey-based health systems that have been seeking to merge since 2019, have filed an appeal in the U.S. District Court for the District of New Jersey.

The appeal comes after a federal judge granted the Federal Trade Commission (FTC) a preliminary injunction earlier this month that pauses the acquisition until after the FTC's internal trial is complete. The administrative trial is set to begin on October 12, according to the FTC.

Appealing at this stage is a "rare step," according to Law360, because most companies choose to relinquish their plans to merge after a legal challenge by the FTC.

WHY THIS MATTERS

Hackensack and Englewood announced their plans to merge back in the fall of 2019. The deal would give Hackensack control of three of the six acute care hospitals in Bergen County, N.J. For its part in the deal, Englewood would receive a $400 million investment from Hackensack.

It wasn't until December 2020 that the FTC filed an administrative complaint and a legal case against the proposed merger.

The complaint argues that consolidation would eliminate competition between the two health systems, giving insurers few options for inpatient general acute care services in the area. It also alleges that Hackensack would be able to demand higher prices for its services and that the deal would reduce incentives to improve quality.

On August 4, New Jersey Judge John Michael Vazquez sided with the FTC when he granted the regulator an injunction to halt the merger. Following the ruling, the health systems expressed their disappointment, especially after already getting the green light from the New Jersey Department of Health and the New Jersey Office of the Attorney General.

THE LARGER TREND

Although Hackensack is getting regulatory pushback for its current acquisition, it was able to complete its purchase of JFK Health, an Edison-based system, in 2018.

Hospital mergers and acquisitions have been on the rise recently, with 13 announced deals in Q1 2021, compared to 29 in 2020. The trend is expected to continue throughout the year, according to Moody's Investors Service.

The rise in consolidations has left many rural communities without good options for convenient and affordable healthcare service, according to a recent executive order from President Biden that encourages the Department of Justice and FTC to review and revise their merger guidelines.

Hospital advocacy groups, including the Federation of American Hospitals and the American Hospital Association, pushed back on the executive order, saying integration and scale can be beneficial in responding to community needs, particularly during a pandemic.

However, following the recent "tidal wave of merger filings," the FTC announced earlier this month it was adjusting its review process and that companies who complete their deals before formal approval from the FTC risk having them unwound down the road.

"Companies that choose to proceed with transactions that have not been fully investigated are doing so at their own risk," the FTC said in its announcement. "Of course, this action should not be construed as a determination that the deal is unlawful, just as the fact that we have not issued such a letter with respect to an HSR filing should not be construed as a determination that a deal is lawful."

This follows an investigation the FTC began earlier this year to look into how past mergers impacted competition with hopes to use its findings to revamp its merger retrospective program.

Twitter: @HackettMallory
Email the writer: mhackett@himss.org