FTC Challenge Blocks Inova Merger

By Kristen Mack

Saturday, June 7, 2008

Northern Virginia’s largest hospital chain yesterday abandoned its plans to merge with Prince William Hospital in Manassas, citing a legal challenge from the Federal Trade Commission to block the deal.

Inova Health System said that the decision was difficult, but that both health-care providers will continue to operate independently.

“After careful consideration and by mutual agreement, Prince William Health System and Inova Health System have decided to withdraw their plans for a merger,” a statement released by Inova said. “A challenge and unusual process changes by the Federal Trade Commission threatened to prolong completion of the merger by as much as two years, which both health systems believe is not in the best interest of the communities they serve.”

Last month, the commission and Virginia Attorney General Robert F. McDonnell filed a legal challenge against the health systems, saying the merger would violate federal antitrust laws and lead to increased costs and reduced coverage for Northern Virginians.

An artist's rendering of the proposed HCA medical campus.

It served as a setback for Inova’s 22-month attempt to add to its network of five hospitals in the region. It also hurt Prince William Health System’s efforts to gain access to the millions of dollars needed to expand to keep up with the county’s growth.

The merger was expected to be completed at the end of May. But the commission and McDonnell (R) sought a temporary restraining order and a preliminary injunction in U.S. District Court in Alexandria to stop the deal, pending an administrative trial.

“The parties’ decision to abandon its merger reflects the strength of our argument that the anti-competitive effect was real,” said David Wales, deputy director of the commission’s Bureau of Competition. “The evidence we presented in federal court tipped the parties’ decision to walk away. We think this is a huge victory for the residents of Northern Virginia.”

Inova and Prince William Health System initially said they would “vigorously defend” the commission’s challenge.

Mike Dailey, chairman of the Prince William Health System Board of Trustees, said yesterday the hospital will take time to reevaluate its options.

“Our goal is to achieve better health for the community,” said Michael J. Schwartz, president and chief executive of Prince William Health System, adding that it will continue to explore alternatives. “It became clear to us that this was going to become a very long and expensive process that we simply did not feel was in the best interest of the community.”

Prince William Health System, an independent nonprofit organization in Manassas, operates the acute-care Prince William Hospital, which serves the western part of the county along with the cities of Manassas and Manassas Park. The Prince William system sought Inova as a partner because it was willing to invest more than $200 million to renovate and expand the hospital.

If the merger had been approved, Inova would have controlled about 73 percent of the licensed hospital beds in Northern Virginia, according to the FTC. The deal would have left four independent hospitals in the region, including Virginia Hospital Center in Arlington County and Potomac Hospital in Woodbridge.

Tagged: Broadlands

Your Thoughts...

Are you happy that the school year is over?