The Department of Justice has reached a settlement with Geisinger Health and Evangelical Community Hospital that will resolve the department’s ongoing civil antitrust litigation challenging Geisinger’s partial acquisition of Evangelical.

The settlement requires Geisinger to cap its ownership interest in Evangelical at a 7.5% passive interest and eliminates additional entanglements between the two competing hospitals.

On Aug. 5, 2020, the Department of Justice Antitrust Division filed a civil antitrust lawsuit challenging Geisinger’s partial acquisition of Evangelical. The department 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, where the two hospital systems together account for approximately 70% of the market.

According to the complaint, the partial-acquisition agreement created significant entanglements between the hospitals, reducing their incentives to compete against each other and increasing the likelihood of harmful coordination. For example, Geisinger was slated to obtain a 30% ownership interest in Evangelical in exchange for providing $100 million to Evangelical for use on projects approved by Geisinger.

The terms of the settlement are intended to prevent Geisinger from exercising any form of control or influence over Evangelical and to restore the defendants’ incentives to compete with each other on both quality and price.

In addition to capping Geisinger’s ownership interest in Evangelical, the proposed settlement restricts Geisinger from increasing its ownership interest in Evangelical, making any loan or providing any line of credit to Evangelical, or exerting any control over Evangelical’s expenditure of funds. While fully addressing the harm threatened by the partial-acquisition agreement, the settlement allows procompetitive aspects of defendants’ proposal to move forward.