Testing the antitrust waters once again, PinnacleHealth System wants to buy 115-bed Community General Osteopathic Hospital, the only acute-care hospital in Harrisburg, Pa., it doesn't already own.
The boards of both organizations approved a letter of intent to pursue a full-asset merger last week.
The boards based their votes on an assessment that a merger would result in the greatest community benefit compared with other options, such as allowing Community General to continue and possibly fail as a freestanding facility, the hospitals said.
If a definitive agreement is hammered out and approved by state regulators, the hospitals expect to complete their deal by July. Financial terms haven't been determined.
Community General earned $1.9 million on $50 million in operating revenues last year, it said.
Tentative plans call for Community General to remain an acute-care facility for at least three years. Details would be worked out as part of a definitive agreement.
Right off, however, the proposed deal would have to pass muster with the state attorney general's office. Under an existing consent decree governing PinnacleHealth, the attorney general can block the deal.
"We are only at the beginning stage of the merger process," said John Cramer, PinnacleHealth's president and chief executive officer. "As we know from previous experience, the merger process is a time-consuming one."
In 1995 the state allowed Harrisburg Hospital and Polyclinic Medical Center, Harrisburg's other acute-care hospitals, to merge and form PinnacleHealth under an antitrust settlement that imposed certain restrictions on the their business activities.
In exchange for controlling nearly 90% of Harrisburg's 930 staffed hospital beds, PinnacleHealth agreed to generate savings of at least $70 million over the first five years of the merger and to limit price hikes (July 24, 1995, p. 2).
The settlement requires PinnacleHealth to get the state's approval for any other hospital acquisition or merger in its service area.
Community General has been searching for a partner since 1996, when negotiations with Penn State University Hospital-Milton S. Hershey Medical Center fell apart.
Before deciding to pair with PinnacleHealth, it also considered partnering with a local network called Alliance4Health as well as a sale to a for-profit chain, said George Strohl Jr., president and CEO of Community General. He declined to name the for-profit suitor.
Optimistic that a merger can pass antitrust scrutiny, Strohl said, "We're going to give it our best shot."