Two Davenport, Iowa, hospitals' preliminary meetings with the U.S. Justice Department headed off a lengthy antitrust review of their proposed merger and led to a speedy clearance.
Executives at 245-bed Mercy Hospital and 217-bed St. Luke's Hospital filed their required pare-merger notification with the federal government March 17 and learned just last week that it wouldn't be challenged.
"Our attitude and approach to submitting the data early during the investigation assisted us," said St. Luke's President Leo Bressanelli, who will serve as president and chief executive officer of the new parent corporation, Genesis Health System."We tried to respond and give them all the information they need on the front end without putting us against the clock."
The Justice Department had 30 days to clear the Genesis deal, challenge the merger or request more documents, but gave it the go-ahead within six days.
The hospitals' pare-merger notification came after taking the unusual step of meeting with the Justice Department several times in the past five months. Hospitals generally do not invite antitrust scrutiny of such deals before the filing of notification documents.
A second request for data usually signals that authorities have decided to conduct a more extensive and possibly time-consuming review of the transaction.
The hospitals said they answered the Justice Department's questions in more than 25 meetings and telephone conferences with federal investigators since Oct. 19, 1993.
A merger would give Genesis control of two of the market's four hospitals, 75% of the staffed inpatient beds in Davenport and 41% of the staffed inpatient beds in the market known as the Quad Cities (Dee. 6, 1993, p. 4). The area straddles the Mississippi River and comprises four cities in Iowa and Illinois.
It's the second major Justice Department probe in the last two years in the market.
In 1992, 507-bed Trinity Medical Center was formed after a four-month investigation of the merger of Franciscan Medical Center in Rock Island, Ill., and United Hospital in Moline, Ill.
The market's fourth hospital is 150-bed Davenport Medical Center.
As part of the new system, the existing St. Luke's will be known as Genesis Medical Center East, while Mercy will be known as Genesis Medical Center West. Both hospitals will continue to provide basic acute care, but specialized services would be centralized at one of the facilities.
The hospitals expect to save between $68 million and $74 million in capital expenditures and operating costs in the next five years, avoiding more than $30 million in overhead expenses.
Both hospitals have been profitable. In 1992, St. Luke's had net income of $7.1 million on net revenues of $75.5 million, while Mercy reported net income of $3.4 million on net revenues of $63 million, according to HCIA, a Baltimore-based healthcare research company.