Federal, state regulators file to stop Penn State Hershey - Pinnacle merger

Written by Ben Allen, General Assignment Reporter | Dec 8, 2015 2:08 PM

FILE PHOTO: Courtesy Penn State Hershey Medical Center

(Harrisburg) -- A proposed blockbuster merger between two major health systems is now on hold. 

Both federal and state regulators plan to go to court to stop the Penn State Hershey Medical Center and PinnacleHealth plan.

The Federal Trade Commission and state Attorney General's office say they'll file documents in federal court Wednesday to stop the merger between the two.

"Well it could lead to substantially less competition in the market, which could lead to increased health care costs. It could also reduce the incentive for each of these health care providers to maintain and improve the quality of care," says Jeff Johnson, spokesman for the state Attorney General's office.

Johnson says a merger could also mean less innovation at the health systems. 

"It would also eliminate the unique competition that Hershey and PinnacleHealth have had for years that have led them to improve the quality of their services." 

Penn State Hershey and PinnacleHealth first announced plans to combine in June 2014.

The FTC says if the two healthcare giants became one, they would control nearly 65 percent of the market in Dauphin, Cumberland, Perry and Lebanon counties.

Penn State Hershey operates one hospital in Dauphin County, while Pinnacle runs two in the county, plus West Shore Hospital in Cumberland County.

Paula Bussard, Chief Strategy Officer for the Hospital and Healthsystem Association of Pennsylvania, wouldn't speak specifically to today's news.

But she did say mergers allow financial stability and more flexibility in adapting to changes.

Penn State Hershey took in nearly $1.4 billion last year, while Pinnacle collected almost $1.1 billion.

Both are classified as non-profit health systems.

Representatives from the health systems declined to speak on tape, but say they're considering their next steps.

They could fight the legal action - which includes an FTC hearing next May. 

The proposed merger is just the latest news as midstate health care providers consolidate.

Recently, Lancaster General Health joined Penn Medicine, and Penn State Hershey added a Blair County health system to its network.

As a note of disclosure, Penn State Hershey is a underwriter for WITF's Transforming Health project.

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