Owner of Iredell hospitals reconsidering plans after Novant drops bid (2024)

The for-profit owner of two Iredell County healthcare facilities said Friday it is “evaluating” its plans following Novant Health Inc.’s decision Tuesday to end its attempt to purchase the facilities for $320 million.

Novant signed an agreement in February 2023 to purchase Lake Norman Regional Medical Center and Davis Regional Psychiatric Hospital of Mooresville from subsidiaries of Community Health Systems Inc.

Novant co-owned both hospitals for an 18-month period in the early 2000s.

Novant cited “continued roadblocks” from the Federal Trade Commission in halting its bid.

On Tuesday, a three-judge panel of the federal Fourth Circuit Court of Appeals voted 2-1 to implement the FTC’s preliminary injunction request on the potential purchase. The request was filed June 9.

Community said in a news release Novant “intends to exercise its right to formally terminate the purchase agreement soon. “

As a result, Community said it is reviewing operations “in light of the termination.”

“In the interim, there will be no disruption to patient care or any other immediate changes to the healthcare services offered by these hospitals,” Community said.

Lake Norman, with 123 beds, provides emergency room, obstetrics, surgical services and outpatient tests and procedures for the Statesville market.

Davis Regional ceased operating as a full-service hospital in 2022. There have been plans to convert the facility into a behavioral health inpatient center.

Both Novant and a federal judge have said the closures of both facilities is a distinct possibility without a Novant takeover.

In January, the FTC voted 3-0 to approve filing a complaint against Novant, saying the acquisitions have the potential to limit competition in that marketplace.

The FTC argued in its preliminary injunction motion that “it would be extraordinarily difficult to ‘unscramble the egg’ if the proposed transaction is deemed unlawful after defendants have integrated their operations, shared competitively sensitive confidential information and laid off staff.”

Novant owns and operates Huntersville Medical Center, a 151-bed facility 11 miles from Lake Norman Regional.

Novant appeared to have gained a significant legal victory on June 5 when federal judge Kenneth Bell of the Western District of N.C. allowed it to proceed while the FTC conducted an antitrust review.

Bell determined that while the Lake Norman hospital is not functioning at the lower level that Novant has described, the current owner has not provided the hospital with appropriate levels of resources and staffing and it is in a “relatively insignificant competitive position.”

Novant said in a statement Tuesday that “we are steadfast in our belief that these facilities and their patients would have greatly benefited from joining Novant Health, but with the FTC’s continued roadblocks we do not see a way to finalize this transaction.”

Novant said it “will look for other ways to support patients and clinicians in these communities.”

Appeal court order

The two judges who agreed to the preliminary injunction provided no reasoning to their decision.

The judge who opposed the injunction wrote that the Novant offer “will revitalize the Davis hospital and enhance competition between Novant and Atrium.”

The judge agreed with Novant’s assertion that “the merger will be pro-competitive because it will enable Novant to better compete with Atrium as it inevitably expands its presence in the Lake Norman area.”

“The Davis hospital seems on its last legs and I worry that, as the district court found, its closure may be imminent. The district found that, without the transaction, Lake Norman Regional’s future is decidedly uncertain as well.

“Such closures would by definition lessen any competition.”

The judge, citing a potential two-year process with the FTC appeal and administrative law judge process, said “I am not sure any financially hard-pressed healthcare facility would have that amount of time.”

“The FTC is acting too aggressively in this case, forgetting there is such a thing as a vibrant private sector.”

The FTC said that if the sale is permitted, Novant would control “an eye-popping” 64% of inpatient acute-care services market for the Lake Norman and northern Mecklenburg County area.

“There is overwhelming evidence that Novant’s deal with Community Health Systems will be detrimental to patients in the eastern Lake Norman area, including leading to higher out-of-pocket costs for critical health care services,” said Henry Liu, director of the FTC’s Bureau of Competition.

Bell ruled that having Novant with two competitive hospitals near Atrium’s Cornelius hospital “will provide more competitive balance” than the current Novant on one side and Community Lake Norman facility on the other.