Listen to this article

A U.S. appellate court on March 22 ruled that the merger between Hackensack Meridian Health and Englewood Health should not proceed because the combination would reduce competition in the health care industry in Bergen County, and increase costs for patients.

A three-judge panel of the U.S. Court of Appeals for the Third Circuit affirmed a District Court order granting a preliminary injunction blocking the deal. The Federal Trade Commission sought the injunction, arguing that the merger would “give the combined hospital system increased bargaining leverage, likely leading to increased prices,” according to an FTC official.

In a 34-page ruling written by Circuit Judge D. Michael Fisher, the panel found that the FTC was justified in seeking to stop the deal. Fisher noted that an expert advising the agency had estimated that the hospitals would have been able to increase prices by $31 million after the merger.

“Outside of the expert analyses, the District Court relied on previous Hackensack merger contracts to conclude the merger would lead to anticompetitive price increases,” Fisher continued. “Contracts between Hackensack and facilities it had merged with in the past show Hackensack’s ability to raise rates.”

In a statement issued after the ruling, Englewood Health said its business remains solid. “Although this is not the decision we had hoped for, we entered merger planning from a position of strength. Englewood Health continues to thrive and remains strong,” the company said. “The goal of the planned merger had always been to improve health care for the communities we serve. This goal has not changed. Englewood Health will continue to move forward with our strategic plan, enhancing our services and improving access for patients and communities across northern New Jersey.”

In a statement, Hackensack Meridian said it was disappointed by the ruling. “The proposed merger had been
approved by the New Jersey Department of Health and the New Jersey Office of Attorney General, and received support from organizations including the American Hospital Association, Association of American Medical Colleges, the New Jersey Hospital Association, and the African American Chamber of Commerce of New Jersey,” the system said. “We firmly believe this merger is in the best interest of our patients and the community at large. At this time, we are weighing the next steps that are in the best interest of the communities we serve.

In January, Hackensack Meridian CEO Robert Garrett told NJBIZ that mergers and acquisitions remained a viable business strategy, but that regulatory scrutiny could make other sorts of combinations more fruitful. “[O]bviously the Federal Trade Commission and the Department of Justice and other regulatory agencies are looking at these transactions very, very closely. And they’re looking at them even more closely going forward,” Garrett said. “So there’s other structures that potentially could work that you can grow, you can consolidate, you can provide new programs and services to communities. They might be joint ventures, they might be affiliation partnerships.”