The only two hospitals in Great Falls, Mont., may have received the legal protection they need to consummate their proposed merger when Gov. Marc Racicot late last month signed into law a healthcare antitrust exemption bill.
The measure was timely from the hospitals' point of view because physicians opposed to the merger have been in contact with the Federal Trade Commission, MODERN HEALTHCARE has learned.
The hospitals are 255-bed Montana Deaconess Medical Center and 139-bed Columbus Hospital.
In November 1994 the hospitals signed a letter of intent to merge, but a few months later decided to hold off on their plans pending the passage of expanded state healthcare antitrust exemption legislation (March 6, p. 36).
The Montana Hospital Association had the legislation introduced in February with the Great Falls hospitals in mind, and the hospitals have been actively lobbying for its passage.
The hospitals also issued a "public benefits guarantee" in which they promised to freeze and then limit price increases if they were allowed to merge.
Racicot signed the measure on April 25 after requesting and obtaining an amendment to extend the same antitrust protections to physicians.
The new law, which took effect immediately, expands 2-year-old legislation that permits healthcare providers to obtain "certificates of public advantage" for collaborative ventures from a new state healthcare authority. The authority was created by the prior legislation. The new law extends the 1993 act to specifically include mergers.
To obtain a certificate, providers have to show that a proposed venture would improve access or quality or lower costs. Providers awarded certificates have to file annual reports with the authority to demonstrate their ventures are doing what they said they would. Certificates can be yanked from providers whose ventures aren't living up to their promises.
Regulations implementing the new law should be issued by July 1, said John Flink, vice president of the Montana Hospital Association.
The Great Falls hospitals have yet to file anything with the state or the federal government, a spokesman said.
In theory, providers obtaining state approval are not only exempt from state antitrust laws but also from federal antitrust laws under the state action immunity doctrine.
Under that doctrine, which has developed through case law, activities permitted or encouraged by states and supervised by them are exempt from federal antitrust scrutiny.
In one letter to the community, the Great Falls hospitals said, "There is no attempt to avoid federal review."
But some physicians who oppose the merger say that's exactly what the hospitals are trying to do.
In fact, the hospitals have retained Joe Sims, a high-profile antitrust attorney with Jones, Day, Reavis & Pogue in Washington, to represent them.
The same firm used the state action immunity doctrine to clear a controversial hospital sale in Lee County, Fla. (Dec. 12, 1994, p. 14).
A merger would give them a monopoly over acute-care services in their market. The closest hospital is in Helena, some 90 miles to the south.
Jake Allen, M.D., a general and vascular surgeon, said the hospitals want to consolidate to control acute-care services in northern Montana.
Allen said he and other members of the Cascade County Medical Society oppose the merger because they don't want to work with just one hospital.
"With one hospital, there's no incentive to give good service," Allen said. "They don't have to listen to you."
Some of the physicians have been in contact with the FTC, Allen said.
Allen and other physicians have challenged the hospitals' estimates of savings that could be generated by a merger and the hospitals' position that the Great Falls market can't support two hospitals in the future. They've also said the hospitals' promise of a price freeze is a "smokescreen" because the promise has "so many outs."
The hospitals' price promise is guaranteed "unless there is some unpredicted significant change in the reimbursements paid by government third-party payers or some other extraordinary event."
Both hospitals are profitable. In 1993, Montana Deaconess earned $2.2 million on revenues of $68.1 million, according to HCIA, a Baltimore-based healthcare information company. Columbus earned $2.5 million on total revenues of $45.1 million that year.