Judge rejects effort to block Penn State Health and PinnacleHealth merger

Written by Ben Allen, General Assignment Reporter | May 10, 2016 4:50 AM

(Harrisburg) -- A federal judge has ruled a landmark merger between two health systems in the midstate can move forward.

In a 26-page decision, Judge John Jones III denied a request by the Federal Trade Commission and state Attorney General's Office to block the merger between Penn State Health and PinnacleHealth.

Jones discards nearly all of the government's arguments, at one point writing that one line of reasoning "defies logic".

Government lawyers had argued Penn State Health and PinnacleHealth primarily serve a four-county area: Cumberland, Dauphin, Lebanon and Perry.

But Judge Jones III writes the market is "too narrow" and does not appropriately account for where each hospitals business comes from.

In 2014, he writes, 43.5% of Hershey's patients traveled from outside the area, and several thousand Pinnacle patients live beyond the four-county region as well.

He also says since the hospitals have reached agreements to hold rates steady for at least the next five years with the two major health insurers in the area (Capital Blue Cross and Highmark), their arguments that rates won't increase are "extremely compelling".

Jones also agrees with Penn State Health's contention that without the merger, it would need to build a bed tower to accomodate additional patients.

He says those costs "would certainly strain Hershey's ability" to provide care, and "negatively impact patients".

The judge notes by merging, Penn State Health and Pinnacle will be able to remain competitive with health systems like Lancaster General Health/Penn Medicine, WellSpan Health, and Geisinger (which is affiliated with Holy Spirit Hospital).

In closing, Jones takes the opportunity to criticize the government once more.

"Like the corner store, the community medical center is a charming but increasingly antiquated concept. It is better for the people they treat that such hospitals unite and survive rather than remain divided and wither."

The merger would create a health system with an estimated $2.7 billion in annual revenue.

In a joint statement, the leaders of Penn State Health and PinnacleHealth praised the decision, saying it will benefit patients, employers and the community.

"We remain committed to our integration plans with a focus on the people and communities we serve, as well as the many dedicated people who deliver patient care, educate our next generation of care providers, and work to shape the future of medicine," said Dr. A. Craig Hillemeier, CEO of Penn State Health, dean of Penn State College of Medicine and Penn State's senior vice president for health affairs.

"We are grateful to the many employers, community physicians, commercial insurance providers, community leaders and others who have recognized the benefits of our integration and demonstrated their broad support for it," said Michael A. Young, president and CEO of PinnacleHealth.

The Federal Trade Commission and state Attorney General's Office both say they're disappointed in the decision and reviewing it.

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