FTC moves to block $320M deal for 2 North Carolina hospitals

The Federal Trade Commission is aiming to stop Novant Health’s planned acquisition of two hospitals in North Carolina, but the system says it’s ready for a battle.

The Federal Trade Commission is suing to block Novant Health's purchase of two hospitals in North Carolina. (Image credit: ©Roman Babakin - stock.adobe.com)

The FTC said last week that it’s suing to stop Novant’s purchase of the facilities from Community Health Systems, the for-profit system based in Tennessee. Novant is planning to buy Lake Norman Regional Medical Center and Davis Regional Medical Center in a $320 million deal. The transaction would also involve some associated clinic and outpatient facilities.

But the FTC is objecting to the deal, saying it would lead to higher prices for consumers, and the commission says Novant would have less incentive to make investments to improve patient care. The commission has authorized a suit and petitioned the U.S. District Court for the Western District of North Carolina to put the brakes on the deal before a hearing.

For its part, Novant Health says it’s willing to go to court if necessary.

In a statement sent to Chief Healthcare Executive®, Novant says it remains confident it can bring long-term stability to the hospitals.

“As a nationally recognized leader in quality and patient safety, Novant Health is committed to delivering the highest-quality, patient-centered, physician-directed care to the communities served by Lake Norman and Davis Regional Medical Centers,” Novant said in the statement. “We will pursue available legal responses to the FTC’s flawed position and vigorously defend our commitment in court.”

• Read more: Big deals: Looking at the major hospital mergers of 2023

Novant has pledged to improve care at the facilities, including a commitment to restore the Level II Neonatal Intensive Care Unit at Lake Norman Regional (it had moved to a Level I in 2021). Novant also plans to improve physician coverage at Lake Norman, and to help both hospitals recruit doctors, nurses and other critical staff.

Federal regulators continue to show they won’t hesitate to intercede in hospital mergers and acquisitions. Hospital deals are likely to get additional scrutiny from regulators, as the FTC is now asking organizations to provide more information on mergers.

Henry Liu, director of the FTC’s Bureau of Competition, said in a statement that hospital mergers routinely lead to worse outcomes for patients, clinicians and higher prices.

“There is overwhelming evidence that Novant’s deal with Community Health Systems will be detrimental to patients in the Eastern Lake Norman Area, including leading to higher out-of-pocket costs for critical health care services,” Liu said in a statement.

The FTC says if Novant buys the two hospitals, the system could charge higher rates and healthcare costs in the region would rise by several million dollars. Federal regulators say the deal would give Novant nearly 65% of the market for inpatient acute care in North Carolina’s Eastern Lake Norman area.

Novant, based in North Carolina, operates 15 hospitals and has been moving to expand its presence in the Carolinas. Novant struck a $2.4 billion deal to buy three South Carolina hospitals from Tenet Healthcare in November. Novant and Tenet have said they hope to complete that deal in early 2024, if regulators approve the transaction.

The Carolinas have seen big hospital deals. Atrium Health, based in Charlotte, N.C., and Advocate Aurora completed their merger in December 2022, forming a new system called Advocate Health. The merged system operates 67 hospitals in six states.

Most industry analysts expect to see more hospital mergers and acquisitions in 2024, especially as struggling hospitals and systems look for partners to keep their doors open. Analysts expect federal regulators to look closer at deals involving systems in the same regions, and because of that, some larger systems will look to acquire hospitals in other markets.

In December, John Muir Health dropped plans to purchase San Ramon Regional Medical Center from Tenet Healthcare Corp., following FTC opposition.