Hershey-Pinnacle merger: Three facts about Monday’s court ruling

A judge's ruling appeared sympathetic to the planned merger between PinnacleHealth System and Milton S. Hershey Medical Center. - (Photo / Thinkstock)

The largest health care merger in the midstate received a green light Monday from a federal judge, overriding the Federal Trade Commission’s initial attempts to block a deal.

Derry Township-based Milton S. Hershey Medical Center and Harrisburg based PinnacleHealth System are attempting to merge under the banner of Penn State Health.

UPDATE: FTC, attorney general file appeal to this week’s ruling

The FTC and the Pennsylvania Attorney General’s Office originally took legal action against the health systems in December 2015, claiming that a merger between them would dominate a significant amount of the market in the Harrisburg area and jeopardize competition.

Here are three things to know about Judge John E. Jones’ decision yesterday in the U.S. District Court for the Middle District of Pennsylvania:

Preliminary injunction denied

The FTC and the state Attorney General filed for a preliminary injunction, which would have temporarily blocked the health systems from merging while they went to trial in the FTC’s administrative court.

After a judge yesterday denied that request, the hospitals technically, can close the deal at any time and become one, according to Michael Greer, a health care lawyer in the Indianapolis office of law firm Hall Render Killian Heath & Lyman

Whether the FTC will continue its battle against the merger is unknown, but an FTC spokesperson said, “We are disappointed in the ruling and will be considering our options.”

A hearing in the FTC’s administrative court is scheduled to begin May 17.

FTC geographic argument too narrow

The main flaw in the FTC’s argument, according to Jones, was the narrow geographic area from which the agency claimed the health systems draw patients.

The FTC said that the health systems draw most of their patients from Dauphin, Cumberland, Perry and Lebanon Counties, claiming that people within the Harrisburg area mostly seek health care close to home – hence why Penn State Hershey and PinnacleHealth would dominate health care in their geographic market.

The court’s analysis found that the health systems actually draw many patients from outside of the geographic market established by the FTC, which shows the number of hospitals Penn State Hershey and PinnacleHealth are competing against.

“Given the realities of living in Central Pennsylvania, which is largely rural and requires driving distances for specific goods or services, it is our view that these 19 other hospitals within a 65-minute drive of Harrisburg provide a realistic alternative that patients would utilize,” Jones wrote.

Decision based on public interest

After weighing all arguments, Jones cast his decision as one based on public interest.

When Penn State Hershey and PinnacleHealth first filed to merge in 2014, they cited a need for addressing demand for more patient beds at Penn State Hershey.

This week Jones agreed with the health systems that capacity restraints would be alleviated by the merger.

“It is better for the people they treat that such hospitals unite and survive rather than remain divided and wither,” Jones wrote.

Lenay Ruhl

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