Federal prosecutors last week testified that a proposed merger between the only two hospitals in Dubuque, Iowa, would create a monopoly, while one hospital administrator argued that the partnership is necessary to meet competition as far away as 150 miles.
The Justice Department is challenging the proposed merger of 320-bed Mercy Health Center and 124-bed Finley Hospital in a trial before U.S. District Judge Michael Melloy in Dubuque.
Mercy and Finley, both of which are operating in the black and generate annual profits, plan to form the Dubuque Regional Health System (Aug. 29, p. 17).
"There ought to be some cooperation where (hospitals) can achieve cost savings without eliminating the competition," said Steven Sunshine, a deputy assistant attorney general. "Our vision of the future is consumers end up paying lower costs through managed care."
Sister Helen Huewe, the president of Mercy, said that under the merger, existing obligations would be met for managed-care agreements, but no decisions have been made about what will be done after current contracts expire.
James Thomson, vice president of operations for John Deere Health Care, said the managed-care program has spent more than $1 million at Dubuque hospitals, most of it at Finley.
Mr. Thomson worries that if there is just one hospital system in Dubuque, it can raise prices whenever it wants.
However, hospital officials have said the system will control rising costs and strengthen Dubuque's position as a regional healthcare center. They estimate the alliance could save the community as much as $24 million within four years.
The Justice Department disputes those figures.
Sister Huewe defined regional competition as the area within a 150-mile radius of Dubuque. That includes hospitals in Madison, Wis.; the Iowa communities of Cedar Rapids, Davenport and Iowa City; and Rockford, Ill.
"We are competing against regional hospitals," she said.
Prosecuting attorney Gene Cohen questioned whether Dubuque residents would travel out of the area for "run-of-the-mill services."