As 1997 wound down, there still was no final state antitrust blessing of the merger that created Penn State Geisinger Health System.
Under an interim agreement, the Pennsylvania attorney general's office allowed the merger of Penn State Milton S. Hershey Medical Center and Geisinger Health System to be completed on July 1 but with the caveat that the providers would enter an antitrust settlement with the state by Dec. 31 that would guard against anti-competitive behavior (July 7, p. 12).
The interim agreement also gave the attorney general's office the right to block the deal if after six months the new system failed to adequately negotiate contracts with area insurers for advanced clinical services. The attorney general's concerns stemmed from what it deemed was a post-merger "monopoly on tertiary care in 20 counties within central Pennsylvania."
The 454-bed Penn State facility is in Hershey, Pa. Geisinger operates two hospitals, including 548-bed Geisinger Medical Center in Danville, Pa, which was among this year's 100 Top Hospitals (See story, p. 40). The system announced last week it plans to be based in Harrisburg, Pa.
Geisinger also operates a 200,000-enrollee HMO in the market, which could be insulated from competition if the merged system exercised its market power and denied competing plans access to the system's services, according to the attorney general's office.
System officials met with the attorney general's office the week before Christmas.
"We're confident we're progressing and that the attorney general's office will not challenge the merger," said M. Steven Bortner, a spokesman for Penn State Geisinger.
At deadline, a spokesman for the attorney general said the matter was under review and that a decision was expected shortly.
So far, Penn State Geisinger has signed a single contract for tertiary-care services with Health Central, an HMO based in Harrisburg, Pa.
"We feel we're close to reaching agreements with one or two other larger organizations," said Frank Trembulak, the new system's chief operating officer. Those deal could come later this month, he said.
The health system's contracting leverage has been compromised by the highly publicized requirement under the June interim agreement that it demonstrate progress to the attorney general. One health plan that Trembulak declined to identify used the attorney general's requirements "as a threat" to demand excessive concessions.
Rather than respond, Penn State Geisinger walked away from those talks, Trembulak said.
With other plans, Geisinger's experience running its own HMO gives the system an insiders view on what contracting margins are reasonable. "We know what the premiums are," Trembulak said, "and we know what administrative costs and what loss ratios are."