FTC blocks Novant Health's deal to buy two CHS hospitals
The resulting lack of competition would increase annual healthcare costs by several million dollars, says FTC.
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The Federal Trade Commission has sued to block Novant Health's $320 million acquisition of two North Carolina hospitals from Community Health Systems, saying the proposal would likely increase annual healthcare costs by several million dollars.
The Commission issued an administrative complaint and authorized a lawsuit in federal court to block the proposed deal, alleging that Novant Health's purchase of Lake Norman Regional Medical Center and Davis Regional Medical Center threatens to raise prices and reduce incentives to invest in quality and innovative care that would benefit patients.
WHY THIS MATTERS
The not-for-profit Novant Health is among the largest hospital systems in the southeastern United States including in North Carolina, according to the FTC. The FTC also called it one of the most expensive hospital systems in North Carolina.
The proposed deal with CHS would allow Novant to control nearly 65% of the market for inpatient general acute care services in the Eastern Lake Norman Area of North Carolina, which includes Iredell County and northern Mecklenburg County, the FTC said.
With fewer alternatives for inpatient services, Novant would be able to demand higher rates for its services, the FTC said. The proposed acquisition would likely increase annual healthcare costs by several million dollars.
The FTC alleges these higher costs would then be passed on to patients. The deal would also reduce Novant's incentive to compete to attract patients by improving its facilities, service offerings and quality of care, the commission said.
Novant Health operates Huntersville Medical Center, located between Charlotte, North Carolina and Lake Norman. It serves more patients than any other hospital in the Eastern Lake Norman Area, the FTC said.
Under the proposed deal, Novant would acquire Lake Norman Regional Medical Center, which is 11 miles away from Huntersville Medical Center.
Additionally, Novant would acquire other related assets from CHS, including behavioral health hospital Davis Regional Medical Center, a physician group of 24 physicians employed by Lake Norman Regional Medical Center, a majority interest in an endoscopy center in Mooresville and an entity holding a North Carolina certificate of need to build an ambulatory surgery center in Mooresville.
The Commission voted 3-0 to issue the administrative complaint and authorize staff to seek a temporary restraining order and seek a preliminary injunction. The federal court complaint and request for preliminary relief was expected to be filed in the U.S. District Court for the Western District of North Carolina.
The issuance of the administrative complaint marks the beginning of a proceeding in which the allegations will be tried in a formal hearing before an administrative law judge.
THE LARGER TREND
Novant Health is an integrated system of 16 medical centers and more than 1,900 physicians in over 800 locations.
In November 2023, Tenet Healthcare Corporation announced its intention to sell three South Carolina hospitals to Novant Health for approximately $2.4 billion in cash, or after-tax proceeds of $1.75 billion.
In July, subsidiaries of the for profit Community Health Systems agreed to sell three Florida hospitals to Tampa General Hospital in a deal estimated to be worth $290 million, with CHS President and CFO Kevin Hammons saying at the time that the company would continue to gauge interest from outside parties related to future divestitures.
CHS has reportedly sold 20 hospitals since 2020.
HCA Healthcare's stock jumped today after its Q4 earnings announced on January 30 showed better-than-expected financials, according to Seeking Alpha. Reported revenue was $17.3B for the quarter,
"This growth, coupled with improved cost trends, drove solid financial performance in the fourth quarter," CEO Sam Hazen said, according to the report.
ON THE RECORD
"Hospital consolidations often lead to worse outcomes for nurses and doctors, result in higher prices, and can have life and death consequences for patients," said Henry Liu, director of the FTC's Bureau of Competition. "There is overwhelming evidence that Novant's deal with Community Health Systems will be detrimental to patients in the Eastern Lake Norman Area, including leading to higher out-of-pocket costs for critical health care services."
Email the writer: SMorse@himss.org
