Last week, Novant Health called off its plans to purchase two North Carolina hospitals from Community Health Systems (CHS), which is one of the nation’s largest for-profit hospital chains. The decision came after an appellate court granted the Federal Trade Commission an emergency injunction to block the $320 million deal.
Novant — based in Winston-Salem, North Carolina — comprises 19 hospitals and more than 850 outpatient care locations. In February 2023, the health system announced its plans to acquire two CHS hospitals in North Carolina: Lake Norman Regional Medical Center, a 123-bed acute care hospital in Mooresville; and Davis Regional Medical Center in Statesville, which was a 146-bed acute care hospital before its closed in 2022 to transition into a behavioral health hospital.
The FTC had been trying to block the deal for months, arguing that it would hurt competition and raise prices in Charlotte’s northern suburbs. The agency, which sued to block the deal in January, said that the proposed deal would allow Novant to control nearly 65% of the inpatient general acute care services market in the Eastern Lake Norman Area of these northern suburbs.
Earlier, this month, a district court ruled twice in Novant’s favor, saying that the two CHS hospitals would likely have to shut down without the deal.
But last week, an appellate court granted the FTC’s request for a temporary injunction blocking the sale. The injunction would prevent Novant and CHS from finalizing their deal until the appeal process was done, which could take more than two years.
For Novant and CHS, this was the final nail in the coffin.
“Novant Health has worked tirelessly for more than a year to create a path forward for Lake Norman Regional Medical Center and Davis Regional Medical Center. Despite our vision to restore services the area has lost and deliver high quality, remarkable care, we have been met with opposition from the Federal Trade Commission at every step,” a Novant spokesperson wrote in a statement provided to MedCity News.
Novant is still steadfast in its belief that the two hospitals would have “greatly benefited” from joining its health system, but the organization does not see a way to finalize the transaction given the FTC’s continued roadblocks, the spokesperson added.
In a statement released last week, CHS said it is in the process of evaluating the current operations at its two hospitals in light of the deal’s cancellation. The health system assured patients that there will be no disruptions to healthcare services at the two facilities.
The three-judge panel’s ruling ultimately caused the acquisition to fall apart, but the decision wasn’t unanimous. U.S. Circuit Judge Harvie Wilkinson represented the minority of the 2-1 ruling.
Wilkinson wrote that he may have sent the deal back to the FTC if it were “a merger between two behemoths.” However, to him, the FTC was “acting too aggressively” and “forgetting there is such a thing as a vibrant private sector.”
Nathan Ray, partner of healthcare and life sciences at West Monroe, agreed with Wilkinson.
“The decision highlights the significant cost and time uncertainties introduced by FTC involvement, even after a recent favorable judgment,” he wrote in a statement sent to MedCity News. “The FTC’s efforts to slow down deals create more uncertainty, leading companies to reconsider their plans rather than risk prolonged legal battles. This move suggests similar deals might face the same challenges in the future. The FTC’s current approach as it is creating more uncertainty, which is not a positive outcome for any parties involved.”
Photo: AndreyPopov, Getty Images
