The Federal Trade Commission said it will file suit to stop the acquisition of Saint Peter’s Healthcare System by RWJBarnabas Health, alleging that the combination would hurt competition for inpatient general acute care services in Middlesex County.

Under the deal, which was announced in 2020, Saint Peter’s would be integrated into RWJBarnabas while retaining its mission and identity as a Catholic hospital. The partners got a green light in May from state authorities allowing them to establish a “premier academic medical center” in New Brunswick.

But the FTC said the merger would create an entity with 50% of the market in Middlesex County for acute care.

“Saint Peter’s University Hospital is less than 1 mile away from RWJ in New Brunswick, and they are the only two hospitals in that city,” said FTC Bureau of Competition Director Holly Vedova in statement. “There is overwhelming evidence that this acquisition would be bad for patients, because the parties would no longer have to compete to provide the lowest prices and the best quality and service.”

Livingston-based RWJBarnabas operates Robert Wood Johnson University Hospital in New Brunswick. The FTC noted that the other acute care hospitals in Middlesex County are located outside the city. “A combined health system would likely be able to demand higher reimbursement rates and/or more onerous contractual terms than it does today, which will harm consumers,” the agency said.

“RWJ and St. Peter’s are direct competitors and both systems routinely identify the other as the most significant competitor when assessing competition and strategizing on providing general acute care services in Middlesex County,” the FTC said. “This competition incentivizes RWJ and Saint Peter’s to improve quality, technology, amenities, equipment, access to care, and service offerings.”

In addition, “the entry of other health providers into the general acute care services market in Middlesex County will not be timely, likely, or sufficient to counteract the anticompetitive effects of the acquisition.”

In a joint statement, RWJBarnabas CEO Barry Ostrowsky and his counterpart at Saint Peter’s, Leslie Hirsch, said they are reviewing the FTC’s complaint.

“We are incredibly disappointed by these FTC actions against our proposed transaction, which has received full approval from New Jersey’s Attorney General and is supported by grassroots community groups, employer groups, unions, managed care organizations and elected officials at all levels within the State of New Jersey,” the two CEOs said. “We are most disappointed, however, for the people of New Jersey – especially those who reside in our most vulnerable, chronically underserved communities – who will be denied access to the complex care only provided by premier academic medical centers.”

Hospital mergers have resulted in considerable consolidation in the industry in recent years. Proponents argue that large systems can more easily absorb increased costs and, in the long term, reduce costs to consumers. In addition to RWJBarnabas, Hackensack Meridian Health and Atlantic Health System have grown through mergers and acquisitions.

But the FTC has moved to reign in the consolidation trend. In 2020, the FTC sued to block Hackensack Meridian’s deal with Englwood Hospital and Medical Center over concerns about concentration in Bergen County. In March, a federal appeals court upheld the FTC’s action.

The agency said the commission vote was 5-0 in favor of proceeding with the challenge to the RWJBarnabas-Saint Peter’s deal. A complaint and request for a preliminary injunction will be filed in U.S. District Court for the District of New Jersey. The administrative trial is scheduled to begin on Nov. 29, 2022, according to the FTC.

Editor’s note: This story was updated at 9 a.m. EDT on June 3, 2022, to add comments from the CEOs of RWJBarnabas and Saint Peter’s, along with context about hospital consolidation.