A MERGER two years in the making between the Inova Health System and the Prince William Health System was halted last month, with both sides citing the threat of action by the Federal Trade Commission.
System officials jointly announced they were canceling plans to merge, saying that fighting any FTC challenge could take as long as two years and that the delay would disrupt service in the communities they serve.
The organizations said the FTC was forcing "unusual process changes" that would have delayed completion of the merger.
The FTC voted unanimously in mid-May to authorize staff to seek a temporary restraining order and preliminary injunction in federal district court to block the deal, saying it would pursue a full administrative trial on the acquisition.
The action was being pursued jointly with Virginia's Attorney General's Office.
Inova and Prince William originally responded to the FTC action by saying they intended to vigorously pursue the merger. However, a short statement from both organizations last month said they would continue to operate separately.
"Though the decision is a difficult one to make, both health systems will move forward independently and continue to fulfill their not-for-profit community missions of building high-quality, accessible and sophisticated healthcare services for the communities they serve," the statement said.
Inova and Prince William both operate hospitals in northern Virginia. Inova owns five hospitals, including facilities in Fairfax, Fair Oaks, Loudoun and Alexandria, while Prince William operates Prince William Hospital in Manassas and a physician office and outpatient surgical center in Haymarket. The systems announced the proposed merger in April 2006 and entered into an agreement to merge the following August.
The administrative complaint filed by the FTC charges that the proposed acquisition would have violated federal antitrust laws by reducing competition for general acute care inpatient hospital services in northern Virginia; it alleged that consumers would "pay higher prices and lose the benefits of non-price competition."
"There is no question that northern Virginia residents have benefited from the robust competition between Inova and Prince William Hospital through better services and lower prices," said Jeffrey Schmidt, director of the FTC's Bureau of Competition. "If Inova acquires Prince William Health System, this vital competition will be lost, healthcare prices will increase, and many residents will be forced to accept reduced healthcare coverage or no coverage at all."
The acquisition would have given Inova control over approximately 73 percent of the licensed beds in northern Virginia in six separate hospitals, and the chain would have faced competition from only four other independent hospitals in the region.
The decline in competition would have made it harder for health plans to negotiate because it would have stifled the availability of independent competitive alternatives, the FTC said. That could have led to higher healthcare costs for employers, health plan enrollees and consumers, especially in areas serviced by Prince William Health System.
The merger agreement would have included $200 million in capital and resources to improve Prince William facilities.