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FTC and Pennsylvania AG challenge proposed Penn State Hershey and PinnacleHealth merger

Alliance would eliminate significant competition to the detriment of consumers, FTC claims.

Beth Jones Sanborn, Managing Editor

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The Federal Trade Commission in Wednedsay announced it is joining forces with the Pennsylvania Attorney General's Office to block the merger of Penn State Hershey Medical Center with the PinnacleHealth System.

The FTC said it would file a joint complaint in federal district court Wednesday seeking a preliminary injunction against the deal, pending an administrative trial.

The FTC unanimously voted to authorize staff to seek a temporary restraining order and preliminary injunction to keep Penn State Hershey and PinnacleHealth from "consummating the merger and to maintain the status quo" until the administrative trial is resolved.

[Also: FTC blocks merger of two West Virginia hospitals]

Penn State Hershey Medical Center is a nonprofit healthcare system located in Dauphin County that holds 551 beds as well as operating the Penn State Hershey Cancer Institute and Children's Hospital. According to data from the FTC, its total revenue for FY 2014 hit nearly $1.4 billion. PinnacleHealth, in the same county, runs three acute care hospitals: Harrisburg Hospital, West Shore Hospital and Community General Osteopathic. Its total revenue in FY 2014 hit $1.07 billion.

Should the merger be successful, the complaint alleges, the new entity would garner control of approximately 64 percent of the greater Harrisburg, Pennsylvania market.

According to the FTC, the deal would create a "dominant provider of general acute care inpatient hospital services sold to commercial health plans in the area of south-central Pennsylvania".

"The proposed merger would eliminate the significant competition between these hospitals, resulting in higher prices and diminished quality," said Debbie Feinstein, director of the FTC's Bureau of Competition.

[Also: FTC reluctantly backs Phoebe Putney merger, limits hospital's expansion]

Penn State Hershey and Pinnacle fired back, verifying through a statement that they were aware of the FTC's move and alleging the merger is consistent with the goals of the Affordable Care Act.

"It creates the depth of services and scale that is required to manage the health of distinct populations of patients and better positions us to provide the most appropriate care, in the most appropriate setting at the lowest possible cost," the two companies said in a statement. "We are extremely disappointed that the FTC does not share the enthusiasm of the many employers, community leaders, private physicians, commercial insurance providers and others who have recognized the benefits of our integration and demonstrated their broad support for it."

The administrative trial is slated to start May 17, 2016.

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Twitter: @BethJSanborn