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FTC calls Novant acquisition of North Carolina hospitals 'presumptively unlawful', seeks to block it

por John R. Fischer, Senior Reporter | April 04, 2024
Business Affairs
Davis Regional Medical Center (Photo courtesy of Piedmont HealthCare)
The Federal Trade Commission is seeking a preliminary injunction to stop Novant Health’s planned $320 million acquisition of two Community Health Systems hospitals in the northern suburbs of Charlotte, North Carolina out of concern that the deal would hinder competition and hike prices for patients.

According to the antitrust agency, which publicly filed for the injunction on March 25, the purchase of Lake Norman Regional and Davis Regional Medical Center would give Novant an “eye-popping” 64% share of the Eastern Lake Norman Area market, thereby making the sale “presumptively unlawful,” reported Healthcare Dive.

“By combining two close competitors, Novant will be able to extract higher rates from insurers, which is likely to translate to higher premiums and out-of-pocket costs for individual health plan members. The proposed transaction will also eliminate competition to attract patients, thereby reducing Novant’s incentive to invest in quality,” said the FTC in a court memo.

The agency estimates that consumer prices would increase by approximately 18% at Lake Norman Regional and 4% at Novant Huntersville, according to Healthcare Dive. It also says the majority share in Novant’s hands would take a heavy hit on two other nearby acute care hospitals, Iredell Memorial and Atrium Lake Norman, the latter of which is anticipated to open in 2025 with limited services.

While Novant says that Atrium Health’s planned opening of Atrium Lake Norman is proof that its deals will not hurt competition in the area, the agency says the introduction of a new hospital or expansion in the same geographic market does not “offset the overwhelming evidence of this deal’s anticompetitive effects.”

Lake Norman Regional is 12 miles from Novant’s Huntersville facility, making them “close competitors,” says the preliminary injunction. The FTC says this shows that the acquisition would “immediately wipe out this competition, reducing defendants’ incentives to invest in quality care and leaving fewer options for patients.”

Novant currently has 19 medical centers and over 850 outpatient locations in North and South Carolina, including six hospitals in Charlotte. It is one of the largest providers in the Southeastern U.S. with a revenue of $8.29 billion, as of 2023, according to the Winston-Salem Journal. Over the last few years, it has executed several acquisitions, its most recent being that of three South Carolina hospitals from Tenet Healthcare for approximately $2.4 billion.

The FTC filed a suit against the deal in January. At the time, a Novant spokesperson told HCB News that it would "pursue available legal responses to the FTC’s flawed position.”

An evidentiary hearing in the case is scheduled to take place on April 29.

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