backFederal Court Denies FTC Attempt to Block $320M Sale of Two North Carolina Hospitals —On June 5, 2024, a federal court in the Western District of North Carolina declined to issue a preliminary injunction blocking the sale of two hospitals in Charlotte, North Carolina, finding that the proposed sale is not likely to lead to anticompetitive behavior and that, on balance, the public equities weigh in favor of allowing the sale to go forward. As a result of this ruling, the proposed sale will close.
Buyer and Seller entered into an Asset Purchase Agreement on February 28, 2023, pursuant to which Buyer agreed to acquire the two hospitals (Hospital A and Hospital B) and related assets from Seller for $320 million. In the past few years, Hospital A has lost important service lines, including the ability to treat dangerous heart attacks (STEMI) in its emergency room, staff a higher level neonatal intensive care unit (NICU level II), and treat certain oncology patients. Seller has refused to invest further in these facilities, but, as part of the deal, Buyer has agreed to keep prices steady for three years and make capital improvements.
Buyer and Seller sought regulatory approval for the transaction, and the FTC conducted an investigation. At the conclusion of the investigation, on January 25, 2024, the FTC found that the deal might violate antitrust laws, so the FTC initiated an administrative proceeding to determine the merits of the proposed transaction. Also on January 25, 2024, the FTC filed a complaint in federal court seeking to block the sale. The FTC is concerned that the hospital market in the Charlotte metropolitan area is already heavily concentrated, with sixteen of the nineteen hospitals in an eight-county area owned either Buyer or Buyer’s competitor. Significantly, however, Buyer’s competitor is in the process of building a new hospital in between Hospital A and another hospital owned by Buyer.
The federal court held a seven-day evidentiary hearing on the matter in May, hearing from twenty-three witnesses, including four experts. In its June 5, 2024 opinion, the Court found that, if the transaction does not proceed, the following is likely to occur: 1) Hospital B will close; 2) there is no plausible alternative buyer for either hospital; 3) Hospital A is unlikely to resume important services it recently terminated, including cardiology, newborn care, and oncology because of Seller’s decision not to invest in growth of the hospital; and 4) Hospital A’s external competitive challenges, particularly the opening of a nearby competitor hospital, likely will shortly lead to its closing. The court found that these likely events, particularly the closing of the hospitals, will reduce rather than enhance competition. Thus, the court reasoned, the FTC is unlikely to be successful in its challenge, and the sale is allowed to go forward.
The separate FTC administrative proceeding will continue. A hearing in that proceeding, previously scheduled for June 26, 2024, may be continued in light of a joint request submitted by all parties.
A copy of the federal court’s opinion is here.
Reporter, Ariana Fuller, Los Angeles, +1 213 443 4342, afuller@kslaw.com.
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Supreme Court Grants Petition for Certiorari to Decide DSH Case—Today, June 10, 2024, the Supreme Court granted the petition for certiorari by a group of hospitals in Advocate Christ Medical Center et al. v Xavier Becerra, Secretary of Health and Human Services (No. 23-715) to decide whether the phrase “entitled . . . to benefits” means the same thing for Supplemental Social Security Benefits as it does for Medicare Part A. In 2022, the Supreme Court ruled in Becerra v. Empire Health Foundation that “entitled to [Medicare Part A] benefits” included “all those qualifying for the [Medicare] program,” whether or not Medicare paid for that hospital stay. 597 U.S. 424, 445 (2022). However, the Court left open the question of whether the phrase “entitled to [SSI] benefits” also includes all those who qualify for the SSI program. Now, in Advocate Christ, the Court will resolve that open question and decide whether “entitled . . . to benefits” has the same meaning for SSI as it does for Medicare Part A. The Supreme Court case docket for Advocate Christ is available here.
OIG Semiannual Report to Congress—OIG submitted its Semiannual Report to Congress (the Report) summarizing the activities of OIG from October 1, 2023, through March 31, 2024. The Report is the first of OIG’s semiannual reports to be modernized to respond to statutory amendments for inspector general reporting requirements and has been reorganized around the areas of greatest vulnerability that OIG identifies for HHS programs each year. These include: (1) safeguarding public health; (2) ensuring the financial integrity of HHS programs; (3) improving outcomes in Medicare and Medicaid; (4) protecting people served by HHS programs; and (5) securing data and technology. The report is available here.