Novant, CHS Fire Back After FTC Sues To Block North Carolina Hospital Sale

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Dive Brief:

• Novant Health and Community Health Systems are firing back at regulators’ claims that the proposed $320 million sale of two CHS North Carolina hospitals to Novant would raise prices and reduce incentives to provide quality care.
• In an court filing this week, the health systems argued that the Federal Trade Commission’s allegations are based on a “distorted and artificially narrow view” of the Charlotte, North Carolina–area market that overestimates the hospitals’ competitive power.
• Regulators sued to block the sale of CHS’ Lake Norman Regional Medical Center and Davis Regional Medical Center to Novant in January. In a memo filed last month, the FTC said the deal would give Novant an “eye-popping” 64% share of the market in the Eastern Lake Norman area in the northern suburbs of Charlotte.

Dive Insight: 

The two systems are arguing that the FTC’s argument is based on inaccurate estimates of market shares in the region, ignoring other competitors and overstating CHS’ significance. 

Nonprofit Novant operates seven acute care hospitals in the Charlotte area, though none in Iredell County, where the two contested hospitals are located. 

Meanwhile CHS, a Franklin, Tennessee-based operator with hospitals in 15 states, is one of the smaller health systems in the region, the systems argue.

Novant will make needed investments in the two hospitals, which CHS has lacked the market power to improve, according to the filing. Davis ended hospital services except for behavioral healthcare in 2022, and Lake Norman has a “low and declining occupancy rate,” the systems said.

The deal could even lower costs through better expense controls and improved quality when Lake Norman is integrated within Novant, they said. Despite the hospitals’ claims, a growing body of research has shown hospital mergers and acquisitions don’t lower costs or improve quality of care.

The providers also argue the FTC’s picture of competition in the area is inaccurate. The Eastern Lake Norman area is “gerrymandered” to avoid some of Novant’s major competitors, including Atrium Health, which will open a new hospital in the area next year, the health systems said.

The new facility, Atrium Lake Norman, would serve nearly as many patients as CHS’ Lake Norman on an average day, even with only 30 inpatient beds, according to the filing. The systems also listed competitors like CaroMont Health and Iredell Health nearby. 

The opposition from Novant and CHS comes as North Carolina Treasurer Dale Folwell backed the FTC’s lawsuit. In an amicus brief filed this week, Folwell argued the acquisition would increase costs for the state’s health plan and for taxpayers — a problem that already threatens beneficiaries’ access to care.

“If the prices rise further still, the Plan could go into a death spiral, where the young and healthy leave the plan, which raises costs and premiums for those who remain, causing even more members to leave,” the treasurer wrote.