The Department of Justice announced today that it has reached a settlement with Geisinger Health (Geisinger) and Evangelical Community Hospital (Evangelical) that will resolve the department’s ongoing civil antitrust litigation challenging Geisinger’s partial acquisition of Evangelical. Among other terms, the settlement requires Geisinger to cap its ownership interest in Evangelical at a 7.5% passive interest and eliminates additional entanglements between the two competing hospitals.
On Aug. 5, 2020, the Department of Justice Antitrust Division filed a civil antitrust lawsuit challenging Geisinger’s partial acquisition of Evangelical. The department alleged that Geisinger and Evangelical are close competitors for inpatient general acute-care hospital services for patients in a six-county area in central Pennsylvania, where the two hospital systems together account for approximately 70% of the market.
“Now, more than ever, Americans need access to quality healthcare services at affordable prices,” said Richard A. Powers, Acting Assistant Attorney General of the Antitrust Division. “The anticompetitive agreement between Geisinger and Evangelical reduced their incentives to compete on the price, quality, and availability of high-quality healthcare services, which would have harmed patients in central Pennsylvania. Today’s settlement ensures that those patients will continue to benefit from robust competition between Geisinger and Evangelical.”
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According to the complaint, the partial-acquisition agreement created significant entanglements between the hospitals, reducing their incentives to compete against each other and increasing the likelihood of harmful coordination. For example, Geisinger was slated to obtain a 30% ownership interest in Evangelical in exchange for providing $100 million to Evangelical for use on projects approved by Geisinger. These terms would have set Geisinger up as a critical source of funding for Evangelical for the foreseeable future and provided opportunities for Geisinger to influence strategic decisions of its competitor. The agreement also gave Geisinger rights of first offer and first refusal for certain transactions and joint ventures, which, in conjunction with other provisions in the agreement, would have made it difficult for Evangelical to partner with other healthcare entities. The department alleged that the provisions of the partial-acquisition agreement functioned together to substantially lessen competition and unreasonably restrain trade in the market for inpatient hospital services in central Pennsylvania.