Two Montana hospitals are seeking important clarifications from the Montana attorney general's office before signing an agreement that exempts their merger from state antitrust laws in exchange for certain restrictions.
Most importantly, the hospitals don't want to be required to achieve all their promised cost savings through price cuts.
"This should not be interpreted as us viewing the COPA (certificate of public advantage) as having serious flaws," said Laura Goldhahn-Konen, a spokeswoman for the hospitals. "We're very pleased with the COPA, but we want to make sure we're all singing from the same song sheet."
But the hospitals' respective boards have not scheduled a meeting to take a final vote on whether to accept the state's offer. Goldhahn-Konen said the hospitals have until early June to accept or reject the agreement.
The hospitals-Montana Deaconess Medical Center and Columbus Hospital-are the only two acute-care facilities in Great Falls, Mont. Because a merger would give them an acute-care monopoly, the hospitals last October applied for a COPA under the state's 1993 healthcare antitrust exemption law. Providers can obtain certificates that exempt them from state antitrust laws if they can prove the consumer benefits stemming from their transactions outweigh any risk to competition.
The state granted the hospitals their certificate in March but with a number of conditions attached (March 18, p. 5).
Most notably, the agreement requires the hospitals to generate at least $86 million in savings over the first 10 years of the merger. The agreement restricts hospital price increases by limiting their cost increases and then capping annual profit margins at 6%.
The agreement appears to require the hospitals to meet their cost savings target solely by controlling prices, and that seems to be the primary sticking point for the hospitals.
The agreement states: "The department will require that these savings be passed on to consumers in the form of price reductions."
In an April 3 letter to the Montana attorney general's office, the hospitals complained that the expressed method of achieving the savings target limits their flexibility and actually may inhibit the hospitals from providing other community benefits.
"Both boards are very concerned that a literal reading of the COPA might require that all cost savings resulting from the merger be passed on in the form of price reductions," they said. "We are concerned that any such rigidity might in fact limit, not maximize, the community benefits that can be delivered as a result of the merger by preventing the hospital from introducing new services or improving existing services."
The hospitals would like expenditures on new or improved services to count toward the savings target.
Goldhahn-Konen said hospital representatives would be meeting soon with state officials to discuss the hospitals' concerns.