Federal Appeals Court Blocks New Jersey Hospital Merger

A federal appeals court has blocked the proposed hospital merger between New Jersey-based Hackensack Meridian Health and Englewood Health, stating that the merger would hurt competition and increase healthcare prices for consumers.

The health systems first signed a definitive agreement to merge in October 2019. Hackensack Meridian Health committed to investing $400 million to acquire Englewood Health and build on pair’s existing clinical and academic affiliation.

The deal has faced significant pushback over the last few years. The Federal Trade Commission (FTC) filed an administrative complaint in December 2020, alleging that the deal would hurt competition as the merged health system would control three of the six inpatient general acute care hospitals in Bergen County, New Jersey.

The hospital merger was paused in August 2021 when the US District Court of New Jersey granted a preliminary injunction against the deal.

The recent decision from the US Court of Appeals for the Third Circuit echoed the concerns of the FTC and the US District Court of New Jersey.

The ruling stated that the merger would have anticompetitive effects. According to the court document, the president of Englewood initially expressed hesitation about sharing information with Hackensack should the deal not go forward, as the hospitals view each other as competitors.

The two health systems attract patients from similar areas in northern New Jersey, and the courts determined that the merger deal would eliminate competition.

Englewood Health consists of Englewood Hospital in Bergen County, the Englewood Health Physician Network, and the Englewood Health Foundation. Englewood Hospital provides patients with primary, secondary, and some non-complex tertiary services. The health system currently operates around 350 beds.

Hackensack Meridian Health is the largest hospital system in New Jersey and runs Hackensack University Medical Center (HUMC) and Pascack Valley Medical Center, both in Bergen County. HUMC offers all levels of care and is the only hospital in Hackensack that provides complex and quaternary services.

“In recent years, Hackensack has acquired other health providers, each time raising prices at the acquired facility,” the ruling noted.

The hospitals had claimed that the merger would provide quality improvements to both health systems. However, the ruling stated that these improvements were not specific to the acquisition and would likely happen regardless of a merger.

“Englewood scores better than HUMC [Hackensack University Medical Center] on multiple important performance measures, such as hospital safety, patient experience, timely and effective care, nursing recognition, and healthcare-associated infection rates,” the ruling stated. “If the merger occurs, consumers would likely be disadvantaged because Englewood would no longer have an incentive to outperform HUMC and HUMC would have no reason to strive for improvement in those areas.”

The FTC expressed its support for the US Court of Appeals ruling.

“Today’s win affirms the FTC’s consistent position: that patients and their families in Bergen County, New Jersey would be poorly served by this anticompetitive merger,” John M. Newman, deputy director of the FTC Bureau of Competition, said in a statement. “Had it been allowed to proceed, patients would have been left with fewer alternatives for inpatient general acute care services, which likely would have driven up prices and diminished the quality of care available in the area.”

In a statement acquired by nj.com, Hackensack Meridian Health officials said they were disappointed with the outcome.

“We firmly believe this merger is in the best interest of our patients and the community at large,” the statement read. “At this time, we are weighing the next steps that are in the best interest of the communities we serve.”

A handful of hospital groups had supported the merger. In September 2021, the American Hospital Association (AHA) and the Association of American Medical Colleges (AAMC) argued that the FTC’s merger challenge was based on a flawed methodology.

The amicus brief stated that the FTC’s approach to defining the relevant geographic market in the case conflicted with settled law, economic principles, and business reality.