June 18 (Reuters) - Healthcare company Novant Health

said on Tuesday that it is abandoning a $320 million deal to

acquire two North Carolina hospitals from Community Health

Systems ( CYH ), after a U.S. appeals court temporarily blocked

the transaction.

Siding with the U.S. Federal Trade Commission, the Richmond,

Virginia-based 4th U.S. Circuit Court of Appeals ruled 2-1 on

Tuesday to suspend the deal while the FTC challenged a lower

court's decision that let the acquisition move forward.

Winston-Salem, North Carolina-based Novant said soon

afterward that it was scrapping its plan to purchase the two

Charlotte-area hospitals.

"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," the company said in a

statement.

The FTC and lawyers and spokespeople for Franklin,

Tennessee-based Community Health Systems ( CYH ) did not immediately

respond to requests for comment.

The FTC sued to block the transaction in January after

filing an administrative action challenging the deal, claiming

it would lead to higher prices and reduced innovative care.

Siding with the hospital companies, U.S. District Judge

Kenneth Bell in Charlotte said in a June 5 decision that the

public interest was not "best served" by stopping Novant's

proposed transaction.

The merger "carries at least as much likelihood of

competitive benefits as it does competitive harm," the judge

wrote.

The FTC appealed Bell's order to the 4th Circuit and asked

the court to halt the transaction in the meantime.

FTC Chair Lina Khan has said the healthcare markets are a

priority in the Biden administration's antitrust enforcement

agenda.

A hearing in the agency's administrative case against

the hospital deal was set for July 26.

The case is Federal Trade Commission v. Novant Health Inc

and Community Health Systems Inc ( CYH ), 4th U.S. Circuit Court of

Appeals, No. 24-1526.

For FTC: Benjamin Aiken of FTC

For Novant: Heidi Hubbard and Sarah Harris of Williams &

Connolly

For Community Health Systems ( CYH ): Michael Perry and Jamie France

of Gibson, Dunn & Crutcher

Read more:

FTC loses bid to block $320 million hospital merger in North

Carolina