Court allows $320M sale of 2 North Carolina hospitals to move forward

Novant Health has secured a favorable court ruling in its bid to buy two North Carolina hospitals from Community Health Systems.

A federal judge has signed off on Novant Health's bid to buy Lake Norman Regional Medical Center, above, and Davis Regional Medical Center. Novant is buying the hospitals from Community Health Systems in a $320 million deal.

A federal judge in North Carolina rejected the Federal Trade Commission’s bid to block Novant’s purchase of the two hospitals. In a ruling issued this week, U.S. District Judge Kenneth Bell wrote that Novant’s purchase of the two hospitals is in the best interest of the public. The judge also noted that the FTC administrative process would continue.

Novant struck a deal with CHS to buy Lake Norman Regional Medical Center and Davis Regional Medical Center in a $320 million transaction. The deal includes clinics associated with the facilities.

Carl S. Armato, president and CEO, Novant Health, welcomed the judge’s decision and called it “a victory for the area.”

Novant says that it will sustain and improve healthcare services for patients served by the hospitals and has adamantly rejected the FTC’s arguments against the deal.

“We have always believed these communities deserve access to a rich healthcare ecosystem with robust and comprehensive care services from family physicians to pediatrics and specialty care,” Armato said in a statement. “We’re eager to welcome the Lake Norman and Davis facilities into the Novant Health network and we look forward to not only restoring healthcare services the area has lost, but also bringing our renowned safety and quality excellence to the community.”

The FTC moved to block the deal, arguing that it would lead to higher out-of-pocket costs for consumers. An FTC spokesperson said Friday that the commission had no comment on the ruling.

Federal regulators said the deal would give Novant nearly 65% of the market for inpatient acute care in North Carolina’s Eastern Lake Norman area. Regulators argued that the Novant-CHS deal would result in less competition, and thus less incentive to maintain services and keep prices affordable.

In the ruling, the judge noted that Atrium Health, part of Advocate Health, is building a new hospital near Lake Norman, a fast-growing area in the Charlotte region. Bell noted that it’s licensed as a 30-bed hospital, but can expand to 50 beds and is being built on a hospital campus that is zoned for 140 beds.

The judge also determined that while Novant would no longer be competing with Lake Norman Regional, the system would still be competing with Atrium Health for patients in the region.

Bell also cited Novant Health’s commitment “that it will not directly or indirectly increase prices at LNR or Davis for three years.”

The judge noted the highly concentrated healthcare market in the Charlotte area, with Atrium Health, North Carolina’s largest system, and Novant as the dominant players vying for customers. While there are a few other providers, Bell wrote that “it is a two-horse race, with one horse clearly in the lead.”

Novant argued that the sale should move forward because if the transaction falls apart, Davis Regional would likely close. CHS closed the hospital in 2022 for financial reasons and converted it into a behavioral health facility, and the judge cited the prospect of the hospital’s closure in his ruling.

“Keeping Davis open is clearly in the public interest because its closure would eliminate critically needed inpatient psychiatric services,” Bell wrote in the opinion.

Novant Health has made public pledges outlining its commitment to the hospitals. Novant says it would maintain Lake Norman Regional as a general acute-care hospital and also restore Level II status to the neonatal intensive care unit. Novant also said it would expand cardiac catheterization capabilities and add a colorectal surgical rotation.

In addition, Novant says it would maintain behavioral health services at Davis Regional and evaluate other needs.

Novant says it will upgrade the electronic health record systems at both hospitals, and the system says it will improve recruiting of top doctors, nurses and other staff to the facilities.

Novant, which operates 19 medical centers and more than 850 healthcare sites, has been moving to expand recently. In February, Novant completed the $2.4 billion purchase of three South Carolina hospitals from Tenet Healthcare Corp.

Federal regulators have applied more scrutiny to hospital mergers under President Biden’s administration. FTC opposition has led to some hospitals pulling the plug on planned deals.

John Muir Health had planned to purchase San Ramon Regional Medical Center from Tenet Healthcare Corp. last year. But shortly after the FTC sued to block the deal, the systems dropped their plans. After FTC opposition, SUNY Upstate Medical University dropped its plans to acquire Crouse Health System in Syracuse, N.Y. last year.

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