US hospitals scrap $320 million deal after FTC court win

[June 19, 2024]  By Mike Scarcella

(Reuters) - Healthcare company Novant Health said on Tuesday that it is abandoning a $320 million deal to acquire two North Carolina hospitals from Community Health Systems, after a U.S. appeals court temporarily blocked the transaction.

Siding with the U.S. Federal Trade Commission, the Richmond, Virginia-based 4th U.S. Circuit Court of Appeals ruled 2-1 on Tuesday to suspend the deal while the FTC challenged a lower court's decision that let the acquisition move forward.

Winston-Salem, North Carolina-based Novant said soon afterward that it was scrapping its plan to purchase the two Charlotte-area hospitals.

"We are steadfast in our belief that these facilities and their patients would have greatly benefited from joining Novant Health, but with the FTC’s continued roadblocks we do not see a way to finalize this transaction," the company said in a statement.

The FTC and lawyers and spokespeople for Franklin, Tennessee-based Community Health Systems did not immediately respond to requests for comment.

The FTC sued to block the transaction in January after filing an administrative action challenging the deal, claiming it would lead to higher prices and reduced innovative care.

Siding with the hospital companies, U.S. District Judge Kenneth Bell in Charlotte said in a June 5 decision that the public interest was not “best served” by stopping Novant’s proposed transaction.

The merger “carries at least as much likelihood of competitive benefits as it does competitive harm,” the judge wrote.

The FTC appealed Bell’s order to the 4th Circuit and askedthe court to halt the transaction in the meantime.

FTC Chair Lina Khan has said the healthcare markets are a priority in the Biden administration’s antitrust enforcement agenda.

A hearing in the agency's administrative case against the hospital deal was set for July 26.

The case is Federal Trade Commission v. Novant Health Inc and Community Health Systems Inc, 4th U.S. Circuit Court of Appeals, No. 24-1526.

For FTC: Benjamin Aiken of FTC

For Novant: Heidi Hubbard and Sarah Harris of Williams & Connolly

For Community Health Systems: Michael Perry and Jamie France of Gibson, Dunn & Crutcher

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