Geisinger Health and Evangelical Community Hospital reached a settlement with the Department of Justice (DOJ) in an antitrust case federal officials filed last year over “a partial acquisition” deal between the two health providers.
Geisinger is an integrated healthcare provider with 12 hospitals as well as urgent care centers, outpatient facilities and physician practices across Pennsylvania. It had annual revenue of $7.1 billion in 2019. Evangelical is a 132-bed independent community hospital in Lewisburg with one urgent care center, several outpatient facilities and physician practices in central Pennsylvania. It had annual revenue of $259 million in 2019.
They finalized an agreement to partner in 2019.
But officials alleged Geisinger and Evangelical are close competitors for inpatient general acute-care hospital services for patients in a six-county area in central Pennsylvania, accounting for approximately 70% of the market. According to the DOJ complaint, the agreement between the hospitals would have “reduced their incentives to compete against each other.”
“For example, Geisinger was slated to obtain a 30% ownership interest in Evangelical in exchange for providing $100 million to Evangelical for use on projects approved by Geisinger,” officials said in a statement. “These terms would have set Geisinger up as a critical source of funding for Evangelical for the foreseeable future and provided opportunities for Geisinger to influence strategic decisions of its competitor. The agreement also gave Geisinger rights of first offer and first refusal for certain transactions and joint ventures, which, in conjunction with other provisions in the agreement, would have made it difficult for Evangelical to partner with other healthcare entities.”
The proposed settlement filed in the U.S. District Court for the Middle District of Pennsylvania still needs court approval.
Under the terms of the proposed arrangement, Geisinger will cap its ownership interest in Evangelical at a 7.5% passive interest. The proposed settlement also restricts Geisinger from increasing its ownership interest in Evangelical, making any loan or providing any line of credit to Evangelical, or exerting any control over Evangelical’s spending, DOJ officials said in a statement.
The proposed settlement allows some arrangements to move forward, DOJ officials said in a statement. For instance, it will permit Evangelical to obtain new electronic health record information technology systems and related IT support from Geisinger. It also requires Evangelical to use the funds associated with Geisinger’s passive investment for specific projects that will benefit patients and the community.
“We are pleased to have worked with the Department of Justice to develop a resolution that allows us to maintain our investment in the health of this community,” said Matthew Walsh, executive vice president and chief operating officer at Geisinger, in a statement. “We are grateful that the Department of Justice acknowledges the investments Geisinger has made to Evangelical to date and we look forward to our continued work on projects that will benefit patients and the community at large.”
Evangelical’s CEO Kendra Aucker also praised the proposed settlement agreement.
“Evangelical can best continue to meet the needs of our community by remaining an independent, community hospital and by using Geisinger’s financial support to strengthen our facilities, technology, and services,” she said in a statement.