At the 11th hour before the planned close of their ballyhooed merger, Pennsylvania State University Hospital-Milton S. Hershey Medical Center and Geisinger Health System were still trying to hammer out an antitrust settlement with Pennsylvania's attorney general's office.
After initially claiming that all government approvals were in hand, executives of the two Pennsylvania systems conceded late last week that negotiations with the attorney general's antitrust unit were continuing.
While the attorney general's office declined to provide details of its investigation into the transaction, spokesman Sean Duffy said "a thorough review of the market, availability and accessibility (of care), and the effect of the affiliation in eastern Pennsylvania" was ongoing as of late last week.
"Our position is that the affiliation or merger, whatever you want to call it, needs the approval of the attorney general, and as of yet an agreement has not been reached," Duffy said.
Both sides said an agreement could still be concluded by July 1, the planned merger date. In any case, it seems likely that state concerns could impose operational conditions on the merged health system as part of an antitrust settlement.
Pennsylvania has been a much-emulated pacesetter for creative settlements of antitrust concerns.
In 1994, for example, the state attorney general extracted $31.5 million in price concessions over 10 years from three Williamsport, Pa., hospitals in return for approving a merger that created a monopoly in the hospitals' hometown. The following year, the attorney general reached a similar guaranteed savings settlement, worth $56 million to consumers over five years, with Polyclinic Health System and Capital Health System, both of Harrisburg, Pa., as a condition of blessing their merger to form Pinnacle Health System.
So, it's hardly surprising that the marriage of Danville, Pa.-based Geisinger, and Penn State Hershey (Pa.) Medical Center would draw regulatory scrutiny. The new system's large share of tertiary care in the region and the structure of Geisinger's HMO could be of particular interest to the attorney general.
The merger would create a dominant health system-including an HMO with 200,000 enrollees-in the central part of the state. To be called Penn State Geisinger Health System, the new system would have annual clinical revenues of nearly $1 billion, control 1,345 licensed hospital beds and serve patients in 40 contiguous counties throughout central and eastern Pennsylvania.
After being informed of the attorney general's public statements about the ongoing antitrust investigation, the hospitals' retracted their initial description of the legal picture.
"We are in discussion with the attorney general at present. However, based on those discussion at this point, we have no reason to believe we won't be able to close, hopefully on July 1," said Steven Bortner, a Hershey spokesman.
Although both organizations have emphatically said the deal would close on July 1, the last-minute scramble casts doubt on its timing.
On a positive note, last week the attorney general's office ruled, subject to some technical clarifications, that the transaction wouldn't injure the beneficiaries of the organizations' charitable trusts, a necessary condition for consummation of the deal.