The boards of two Montana hospitals have approved an antitrust agreement with the state, setting the stage for becoming the first hospitals in the country to merge under a state antitrust exemption law.
But the hospitals, which would obtain an acute-care monopoly under the state agreement, still have to pass muster with the Federal Trade Commission, which has been monitoring the deal.
Laura Goldhahn-Konen, a spokeswoman for the hospitals, said the facilities filed their required pre-merger notification documents with the FTC on May 3. The commission has 30 days from that point to approve the deal, challenge it or request additional information from the hospitals to launch a detailed investigation.
If the FTC challenges the deal, the case could become the first test of a state law granting healthcare providers antitrust exemptions for certain transactions that promise to benefit consumers. At least 19 states have such laws on the books.
The hospitals are 339-bed Montana Deaconess Medical Center and 145-bed Columbus Hospital. They're the only two acute-care facilities in Great Falls, Mont. The closest hospital to the two facilities is in Helena, Mont., about 90 miles to the south.
In March, the Montana attorney general's office granted the hospitals' antitrust exemption application, known as a "certificate of public advantage." But, the COPA agreement contained a number of restrictions on the hospitals' business activities, including a 6% profit margin limit and a requirement to generate at least $86 million in savings during the first 10 years of the deal.
Before the boards approved the agreement April 30, they tried to get the state to back off on its requirement that the $86 million in savings be generated solely by price reductions. The hospitals wanted expenditures on new healthcare services to count toward the savings target (April 22, p. 22).
In an April 25 letter to the hospitals, the state rejected the request.
"Services that do not pay for themselves must be subsidized through the 6% net profit margin that the consolidated hospital is allowed to earn under the revenue cap regulation," the state said. "The department believes that this margin is more than sufficient to maintain the financial health of the hospital and accrue surplus funds to pay for programs or new services that benefit the community."
The state also rejected the hospitals' request to unilaterally raise the profit limit to pay for new services or programs. The state said the hospitals must seek state approval to change any terms of the original agreement.
The hospitals have set a July 1 target date to consummate their merger, assuming the FTC doesn't delay or block the transaction.