Two South Carolina hospitals have become the third pair in the country to partner under a state antitrust exemption law.
Late last week, the South Carolina Department of Health and Environmental Control approved the mergerlike partnership of 375-bed Baptist Medical Center and 553-bed Richland Memorial Hospital, the two largest acute-care hospitals in Columbia.
The hospitals took advantage of a 1994 state law that grants state antitrust immunity to healthcare joint ventures, partnerships and mergers if the parties involved agree to provide certain community benefits.
Approval under the law effectively shields the deal from federal antitrust review. A federal doctrine provides that activities permitted and monitored by a state are exempt from federal review.
In December 1995, the only two acute-care hospitals in Asheville, N.C., were the first in the country to receive merger approval using such a statute. Then in July 1996, the only two acute-care hospitals in Great Falls, Mont., did the same.
The South Carolina hospitals first announced their plans to join in December 1995. They agreed on a final plan in the summer of 1996 that would give them control of two-thirds of the Columbia-area's acute-care market.
Then in October 1996, they filed an application for the state exemption, called a "certificate of public advantage," which would allow them to trigger the statute's protections. In their application, they argued that without a partnership the hospitals would likely have to raise rates, reduce quality and reduce charity care.
Under the COPA granted by the state last week, the hospitals agreed to commit 10% of the new system's bottom line to fund community healthcare initiatives, providing no less than $15 million over its first five years.
The hospitals also agreed to submit the system's financial statements to the state for annual reviews, to not raise rates for five years, to provide services regardless of a patient's ability to pay, and to show that the combined system achieved significant savings through reduced operating costs.