Despite a large concentration of hospitals throughout Los Angeles, the merger of National Medical Enterprises and American Medical International isn't likely to result in antitrust problems, observers believe.
Five of the eight AMI hospitals in Southern California are in the Los Angeles area, where they'll be added to the four NME owns.
"The AMI-NME competition is longstanding and has been quite fierce at times," said David Langness, vice president of communications at the Hospital Council of Southern California. "But these particular hospitals have not been close enough to each other to be fierce competitors in most cases," he said.
"AMI hospitals are chiefly in the (San Fernando Valley), with some in Orange County. NME hospitals are chiefly in other portions of Los Angeles-mainly in central L.A.-and in the San Gabriel Valley," he said.
AMI hospitals are "niche community hospitals that don't serve a wide area," said Andy Demetriou, a partner with Jones, Day, Reavis and Pogue in Los Angeles who specializes in mergers and acquisitions in the healthcare industry. "There's not a lot of overlap (between NME and AMI hospitals). I don't see Southern California as a particular (antitrust) problem area."
In Southern California, the merger "could be a marriage made in heaven," Mr. Langness said. "(AMI and NME) could have complementary strengths and build a healthcare network that uses the strengths positively.
"I think (NME Chairman and Chief Executive Officer) Jeffrey Barbakow has pulled off a real coup here, and if it goes through it will be one of the most powerful hospital presences in the West," Mr. Langness said. "And there are still some takeover targets left out there."
But, he added, "it will not be easy merging their corporate cultures."
Antitrust challenges also are unlikely in California's Central Coast, even though an AMI hospital in San Luis Obispo and an NME hospital in Templeton are within 20 miles of each other, Mr. Demetriou said.
Though the hospitals are close, "there is a major barrier both physical and psychological" between them, keeping their patient bases separate, said Nancy Cartwright, a spokeswoman for the Hospital Council of Northern and Central California. The barrier is the Cuesto Grade, a steep road through hilly terrain, she said.
NME owns eight hospitals in Southern California, from Los Angeles through Orange County to San Diego. The company also owns six hospitals in Northern California, where AMI has no presence.