FTC Seeks to Block Novant Health Acquisition in North Carolina

Jan. 29, 2024
Commission alleges that proposed deal with Community Health Systems would allow Novant to control nearly 65 percent of the market for inpatient general acute care service in the area

The Federal Trade Commission continues to closely scrutinize health system mergers. In its most recent action, it has sued to block Novant Health, Inc.’s $320 million acquisition of two North Carolina hospitals from Community Health Systems Inc. (CHS).

The FTC issued an administrative complaint and authorized a lawsuit in federal court to block the proposed acquisition, alleging that Novant Health’s proposed deal to acquire Lake Norman Regional Medical Center and Davis Regional Medical Center from CHS threatens to raise prices and reduce incentives to invest in quality and innovative care that would benefit patients.

“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, in a statement. “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.”

The FTC notes that Novant operates Huntersville Medical Center and serves more patients than any other hospital in the Eastern Lake Norman Area. Novant is one of the largest hospital systems in the southeastern United States including in North Carolina. It is also one of the most expensive hospital systems in North Carolina, according to the FTC’s administrative complaint.

Under the proposed deal, Novant would acquire Lake Norman Regional Medical Center, which sits 11 miles away from Novant’s Huntersville Medical Center. Additionally, Novant would acquire other related assets from CHS including Davis Regional Medical Center (a behavioral health hospital), 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 FTC alleges that the proposed deal with CHS would allow Novant to control nearly 65 percent of the market for inpatient general acute care services (“GAC”) in the Eastern Lake Norman Area of North Carolina, which primarily includes Iredell County and northern Mecklenburg County. Inpatient GAC services include a broad range of essential medical, surgical, and diagnostic services that require an overnight hospital stay.

With fewer alternatives for inpatient GAC services, Novant would be able to demand higher rates for its services, the FTC said. The FTC alleges the proposed acquisition would likely increase annual healthcare costs by several million dollars. 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 FTC vote to issue the administrative complaint and authorize staff to seek a temporary restraining order and seek a preliminary injunction was 3-0. The federal court complaint and request for preliminary relief will be filed in the U.S. District Court for the Western District of North Carolina to halt the transaction pending an administrative proceeding.   

In November 2023, the FTC joined by the California Attorney General’s office, sued to block John Muir Health’s proposed $142.5 million deal to acquire sole ownership of San Ramon Regional Medical Center LLC from current majority owner Tenet Healthcare Corp., saying the deal would drive up healthcare costs.

The FTC alleged that the proposed acquisition would eliminate head-to-head competition between John Muir Health and nearby San Ramon Regional Medical Center. John Muir and San Ramon Medical operate in California’s I-680 corridor, which spans Contra Costa and Alameda Counties in the San Francisco Bay Area.

The FTC argues that the deal would allow John Muir to demand higher rates at its two hospitals as well as San Ramon Medical for inpatient general acute care services (GAC), which are a broad range of essential medical, surgical, and diagnostic services that require an overnight hospital stay. “The elimination of competition between John Muir and San Ramon Medical would also reduce incentives for these hospitals to invest in quality improvements,” the FTC said.

 

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