Nearly 1,000 miles northeast of Missouri, two hospitals in New Hampshire also are facing antitrust scrutiny from law enforcement officials.
But unlike the Missouri providers (See above story), the issue in New Hampshire is pure market share.
Two hospitals there convinced the government that their merger wouldn't be anti-competitive because they competed in a wide geographic market. Now, they want to form a mergerlike partnership with a hospital they said competed in the same wide market.
Optima Health, the parent of Elliot Hospital and Catholic Medical Center, the only two acute-care hospitals in Manchester, N.H., said last week it's "exploring a closer alignment" with St. Joseph Healthcare, an organization that includes St. Joseph Hospital.
St. Joseph is one of the only two hospitals in Nashua, N.H., a city of 80,000 some 20 miles south of Manchester.
The boards of Optima and Covenant Health System, the Lexington, Mass.-based Catholic healthcare system that includes St. Joseph, agreed to a letter of intent and "statement of understanding" to explore development of a joint operating company "which would provide coordinated management," according to a written public statement.
The agreement also calls for Optima to participate as an affiliate of Covenant Health System through its subsidiary Catholic Medical Center.
The arrangement would extend the market influence of the merged Manchester hospitals into an adjacent market that was used to help them win antitrust approval.
The hospitals had argued in antitrust investigations by the U.S. Justice Department and the state attorney general that even though their market share in Manchester would be 100%, the market went beyond Manchester and competition would still exist.
That argument was accepted by the New Hampshire attorney general in combination with a commitment by the hospitals to save $150 million during the next 10 years through the merger and to pass along the savings to consumers. Two weeks later, the Justice Department cleared the merger without comment, in keeping with its practice of not disclosing reasons for decisions.
But an increase in Optima's market influence in the Nashua area will have an impact on the market as previously defined in the Manchester decision, said Walter Maroney, senior assistant attorney general. "We'll be taking a serious look at it," he said.
"We did view the Nashua hospitals as being legitimate competition within a reasonable market for acute care," Maroney said. But a joint operating agreement with St. Joseph would give Optima a significant share of the area's secondary concentration of healthcare services, he said.
The hospitals in Manchester and Nashua are moving into the same 20-mile corridor of smaller towns between their primary service areas, such as Amherst, Bedford, Merrimack and Milford, Maroney said.
But Robert Cholette, chief executive officer of Optima Health, said the market picture has changed since the previous antitrust investigation, and the proposal to align with St. Joseph can't be judged by the same factors. "There's no resemblance to what it used to be," he said. "The competition is getting more fierce than it ever was 21/2 years ago."
Pressures to form regional networks are being heightened by the growth of established HMOs in the state, such as Matthew Thornton Health Plan and Healthsource, and the emergence of other competitors, such as Tufts Associated Health Plans and Oxford Health Plans, Cholette said.
Lahey Hitchcock Clinic already is leveraging a three-state presence of physician practices and healthcare facilities that includes a buildup in Manchester and Nashua, he said.
Lahey Hitchcock, a multispecialty group practice of 900 physicians based in Burlington, Mass., expects to break ground within two months on a 125,000-square-foot medical office building in Manchester that will be the largest freestanding multispecialty facility in New Hampshire, said David Doyle, director of facility planning and development.
The facility would offer "one-stop shopping" for medical, diagnostic and other ancillary services and would bring scattered specialists closer together in a consultative atmosphere, Doyle said.
In Nashua, Lahey Hitchcock acquired St. Joseph's 154-bed acute-care competitor in January, renaming it Southern New Hampshire Regional Medical Center. In between, Lahey Hitchcock has clinics in Amherst, Bedford and Merrimack, Doyle said.
By proposing a joint operating company with St. Joseph Healthcare, Optima not only would be creating a competitive regional provider organization, but the legal vehicle chosen for it also would constitute "an easier approach" to dealing with regulatory scrutiny, Cholette said.
Optima hasn't formally notified federal officials of the proposal because the agreement so far is only to explore the unification in detail, not a commitment.
But even at that point, Cholette said, there would be "no need to be officially reviewed by the Department of Justice just because of the way it's structured."