Resolution of the Antitrust Division’s Challenge to Geisinger Health’s Partial Acquisition of Evangelical Community Hospital

In March 2021, the Antitrust Division announced a settlement resolving civil antitrust litigation filed in August 2020 challenging an agreement between Geisinger Health and Evangelical Community Hospital that amounted to an anticompetitive partial acquisition of Evangelical by Geisinger. The Division alleged that Geisinger and Evangelical are close competitors for inpatient general acute-care hospital services for patients in a six-county area in central Pennsylvania. The partial-acquisition agreement created significant entanglements between the hospitals, reducing their incentives to compete against each other and increasing the likelihood of coordination, harming patients in central Pennsylvania.

Under the hospitals’ original agreement, Geisinger was to obtain a 30% ownership interest in Evangelical in exchange for providing $100 million to Evangelical for use on projects to be approved by Geisinger. The agreement also gave Geisinger certain rights with respect to future transactions and joint ventures. Absent the Division’s challenge, the agreement would have set Geisinger up as a critical source of funding for Evangelical for the foreseeable future, provided opportunities for Geisinger to influence Evangelical’s strategic decisions, and would have made it difficult for Evangelical to partner with other healthcare entities. The Division alleged that the provisions of the partial-acquisition agreement functioned together to substantially lessen competition and unreasonably restrain trade in the market for inpatient hospital services in central Pennsylvania.

The settlement caps Geisinger’s investment and otherwise limits entanglements between the two hospitals to preserve hospital competition in central Pennsylvania. The terms of the proposed final judgment are intended to prevent Geisinger from exercising any form of control or influence over Evangelical and to maintain the two hospitals’ incentives to compete with each other on both quality and price. In addition to capping Geisinger’s ownership interest in Evangelical at a 7.5% passive interest, the settlement restricts Geisinger from increasing its ownership interest in Evangelical, making any loan or providing any line of credit to Evangelical, and exerting any control over Evangelical’s expenditure of funds. Both hospitals are also each required to implement an antitrust compliance program.

The settlement addresses the harm from the partial acquisition while allowing the procompetitive aspects of the hospitals’ agreement to move forward. For this reason, the settlement permits Evangelical to obtain new information technology systems from Geisinger to allow Evangelical to upgrade its electronic health records system and improve the delivery of care to patients in central Pennsylvania. In addition, the funds associated with Geisinger’s passive investment can be used for specific projects that will benefit patients and the community.