Health system drops $320M plan to buy 2 North Carolina hospitals

Just two weeks after Novant Health secured a legal victory in its bid to buy two North Carolina hospitals, another court ruling has spurred the health system to abandon its plans.

Novant Health has dropped its bid to buy Lake Norman Regional Medical Center, above, and Davis Regional Medical Center from Community Health Systems. The FTC secured an injunction from a federal appeals court.

Novant had planned to buy two facilities from Community Health Systems in a $320 million deal, but the Federal Trade Commission has been working to block the acquisition. On Tuesday, the U.S. Court of Appeals for the Fourth District narrowly granted the FTC’s petition for an injunction, delaying the deal.

With the deal being stalled, Novant Health announced Tuesday that it was abandoning its plans to buy Lake Norman Regional Medical Center and Davis Regional Medical Center, The Charlotte Observer and other media outlets reported.

“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,” Novant said in a statement. “We are steadfast in our belief that these facilities and their patients would have greatly benefited from joining Novant Health, but with the FTC’s continued roadblocks we do not see a way to finalize this transaction.”

The appeals court ruled 2-1 in favor of the FTC’s move for an injunction. The brief opinion from the majority states “the court grants the motion and enjoins the acquisition of Lake Norman Regional Medical Center by Novant Health, Inc. pending appeal.”

In his dissenting opinion, Judge J. Harvie Wilkinson III cited a federal district judge’s argument that the deal would benefit the public.

“The district court was not wrong to think the public interest would be facilitated by helping these hospitals find the financial infusion they need to survive,” Wilkinson wrote.

Wilkinson also noted that allowing the matter to return to additional FTC review and an administrative law judge would possibly delay the transaction by more than two years.

"Hospitals such as Davis and Lake Norman Regional may not provide a full menu of advanced procedures, but they do tend to increase access to vital healthcare for underserved populations," Wilkinson wrote. "I am reluctant to place all this in jeopardy."

Novant’s decision represents a remarkable reversal from the court victory earlier this month, which buoyed the health system’s efforts to buy the hospitals. Novant hailed that earlier ruling as “a victory for the area” and pledged to expand more services for patients when the deal was finalized.

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

In his ruling issued earlier this month, U.S. District Judge Kenneth Bell cited the prospect of Davis Regional’s closing, and Novant’s pledges to expand care and services for patients.

The FTC has argued that if Novant was allowed to purchase the hospitals, consumers would see higher prices and could lose services since there would be reduced competition. 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.

In the district judge's ruling earlier this month, Bell wrote that there would be sufficient competition in the region. Bell noted that Atrium Health, part of Advocate Health, is building a new hospital near Lake Norman, a fast-growing area in the Charlotte region.

Novant expressed disappointment in the appeals court ruling that granted the FTC an injunction delaying the transaction. The health system said it had “worked tirelessly for more than a year to create a path forward for Lake Norman Regional Medical Center and Davis Regional Medical Center.”

“The communities served by these facilities deserve better than the fate they’ve been dealt by the FTC so we will look for other ways to support patients and clinicians in these communities,” Novant said in its statement Tuesday.

Novant, which operates 19 medical centers and more than 850 healthcare sites, has been expanding 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. Some hospitals have pulled the plug on planned deals due to FTC opposition.

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.

In addition, SUNY Upstate Medical University dropped its plans to acquire Crouse Health System in Syracuse, N.Y. last year, following the FTC’s objections to the deal.