Feds say Novant gains ‘eye-popping’ market control if takeover of 2 NC hospitals proceeds
In a court memo, Federal Trade Commission lawyers detailed additional concerns about how Novant Health could control what they called an “eye-popping” share of the market if it buys two Lake Norman hospitals for $320 million.
The FTC initially had filed the memo under seal to protect confidential information but a redacted version was filed publicly Monday. The memo supports the government’s lawsuit seeking a preliminary injunction before the Winston-Salem health system can purchase Lake Norman Regional Medical Center in Mooresville and Davis Regional Medical Center, a behavioral health hospital in Statesville.
The centers are owned by Community Health Systems, Inc., which is also a defendant.
The case began in late January when the FTC filed suit in the U.S. District Court for Western District of North Carolina.
The FTC said in the memo that the deal is unlawful in part because “it would result in a combined entity with an eye-popping 64% share of the market in the Eastern Lake Norman Area.”
Lake Norman Regional and Novant Huntersville are competitors only 12 miles away, the memo noted.
Parker Poe Adams & Bernstein, a law firm representing Novant Health, declined to comment Wednesday.
In a statement last month, Novant said its healthcare network is committed to providing high quality care to communities served by Lake Norman and Davis Regional Medical Centers. “We will pursue available legal responses to the FTC’s flawed position and vigorously defend our commitment in court,” Novant stated.
A CHS spokesperson said the regulatory review of the deal is continuing. “A federal judge will make the final determination on whether the transaction can proceed,” CHS said.
Unpacking the FTC arguments
In its memo, the FTC also said the Supreme Court said mergers are perceived as unlawful if they result in a single entity controlling 30% of the market.
The FTC also claimed in its memo:
▪ The takeover would eliminate the elimination of head-to-head competition between Novant Huntersville and Lake Norman Regional.
▪ Aggressive competition between Novant Huntersville and Lake Norman Regional benefits patients through lower prices, improved quality of care and new service offerings. The proposed deal ”would immediately wipe out this competition, reducing defendants’ incentives to invest in quality care and leaving fewer options for patients.”
▪ The deal would allow Novant to obtain higher insurance rates in negotiations because insurers would no longer have the option of contracting with Lake Norman Regional if they fail to reach agreement with Novant, or vice versa.
The complaint also cited Novant’s growth through a decades-long series of mergers. Along with the latest proposal, Novant has worked to acquire six hospitals in the Carolinas in the last year, the FTC said. The complaint also noted that Novant cut hundreds of jobs in at least three rounds of layoffs during the same time.
The parties made an agreement to prevent the deal from being final until a court ruling is made for the injunction request.
Novant is one of the largest hospital systems in North Carolina and the Southeast, and operates more than 800 outpatient facilities and physician office in the Carolinas. Its total revenue was $7.6 billion in 2022, according to the complaint filed by the FTC.
Tennessee-based CHS operates 71 hospitals and thousands of care sites across 15 states. Its annual revenue was $12.2 billion in 2022. The two hospitals Novant wants to buy from CHS are the only ones in North Carolina.
An evidentiary hearing in the case is set for April 29.
Lawyers representing the FTC did not respond to requests for comments from The Charlotte Observer on Wednesday.
This story was originally published March 28, 2024 at 5:50 AM.
