Geisinger Health, Evangelical Community Hospital Resolve DOJ Antitrust Suit

DOJ says the deal will prevent Geisinger from exerting control over Evangelical and "restore the defendants' incentives to compete with each other on both quality and price."

Geisinger Health will cap at 7.5% its partial ownership of smaller, in-state rival Evangelical Community Hospital and will "eliminate additional entanglements" under a deal to settle a federal antitrust lawsuit, the Department of Justice announced.

Provisions of the settlement are designed to prevent Geisinger from exerting control over Evangelical "and to restore the defendants' incentives to compete with each other on both quality and price," DOJ said.

In addition, the settlement would prohibit Geisinger from increasing its ownership stake in Evangelical, loaning or providing a line of credit to Evangelical, or exerting control over Evangelical expenditures, and requires Evangelical to use money from Geisinger for projects that benefit patients and the community. The two providers must also implement antitrust compliance programs.

However, the settlement allows Evangelical to get an electronic health records system and tech support from Geisinger.

The settlement was filed Wednesday in U.S. District Court in Harrisburg and awaits review by a federal judge, and a deal could be completed some time this year.

Richard A. Powers, acting assistant attorney general of DOJ's Antitrust Division said the initial partial-acquisition deal put forward by the rival providers would have "reduced their incentives to compete on the price, quality, and availability of high-quality healthcare services, which would have harmed patients in central Pennsylvania."

"Today's settlement ensures that those patients will continue to benefit from robust competition between Geisinger and Evangelical," Powers said.

Geisinger COO Matthew Walsh said the Danville, PA-based health system was "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."

"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," Walsh said.

In a civil action filed last August, DOJ claimed that Geisinger and Evangelical "are close competitors for inpatient general acute-care hospital services for patients in a six-county area in central Pennsylvania, where the two hospital systems together account for approximately 70% of the market."

DOJ had alleged that the partial-acquisition agreement created "significant entanglements between the hospitals, reducing their incentives to compete against each other and increasing the likelihood of harmful coordination."

Specifically, DOJ said that Geisinger would pay $100 million for a 30% stake in Evangelical, with the money used for upgrades approved by Geisinger.

"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," DOJ said.

The deal also gave Geisinger rights of first offer and first refusal for joint ventures and other projects, which would have hamstrung Evangelical's attempts to partner with other providers.

Combined, DOJ said, the provisions of the partial acquisition "functioned together to substantially lessen competition and unreasonably restrain trade in the market for inpatient hospital services in central Pennsylvania."

Geisinger, with annual revenues of $7.1 billion in 2019, owns 12 hospitals, urgent-care centers, outpatient facilities, and physician practices throughout Pennsylvania, with the flagship 574-bed Geisinger Medical Center.  

Lewisburg-based Evangelical Community Hospital is a 132-bed independent community hospital that operates an urgent-care center, outpatient venues, and physician practices in central Pennsylvania. The hospital had annual revenues of $259 million in 2019. 

Evangelical Responds

Kendra Aucker, president and CEO at Evangelical Community Hospital, cheered the settlement and stressed that it allows her hospital to remain independent.

"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.

Aucker said Geisinger's investment supports Evangelical's expansion project known as PRIME, the Patient Room Improvement, Modernization, and Enhancement project, and a renovated intensive care unit.