The only two hospitals in Cape Girardeau, Mo., are hoping to merge but want to avoid the fate of their peers 85 miles away in Poplar Bluff, Mo.
The hospitals, 264-bed Saint Francis Medical Center and 243-bed Southeast Missouri Hospital, argue that their merger will cut healthcare costs and improve services in Cape Girardeau, the largest healthcare market between St. Louis and Memphis, Tenn. The merged organization would have a monopoly on acute-care services in Cape Girardeau County.
The state attorney general's office, which is looking at the deal, held a public hearing last week to gauge community sentiment about the merger. Hearing participants told MODERN HEALTHCARE that dissent could make the merger a contested issue.
The Cape Girardeau hospitals have not formally offered a consent decree to the attorney general. Such a decree would attempt to guard against anti-competitive behavior by placing some regulatory limitations on the hospitals' business practices should they be allowed to merge. The hospitals also have not filed for federal antitrust clearance.
But they are circulating a "community commitment" in draft form among Cape Girardeau's employers and payers, soliciting comment for a final document to be submitted to the attorney general, attorneys for the hospitals said.
The draft commitment includes some common promises made by merging hospitals, including a price freeze, a rate freeze for payers, new or expanded services and a cost savings of at least $44 million over the next five years.
If the savings goal is not met, the hospitals would pay the shortfall amount into a fund for local healthcare initiatives, according to a copy of the draft obtained by MODERN HEALTHCARE.
James Sexton, president and chief executive officer of Saint Francis, and James Wente, CEO of Southeast Missouri, were both unavailable for comment last week.
Hospital officials have said in public statements that if the merger does not happen, one hospital or the other will be bought by a national chain or a regional system based in St. Louis. Cape Girardeau is not big enough to support both hospitals in the long run, they have said.
According to HCIA, a Baltimore-based healthcare information company, both hospitals are fiscally healthy.
Southeast Missouri reported 1997 net income of $8.5 million on total revenues of $111.1 million, for a profit margin of 7.8%. That was an increase in revenues from $105.5 million in 1996. Net income in 1996 was slightly higher, at $8.9 million.
At Saint Francis, net income for 1997 was $8.1 million on total revenues of $94.3 million, for a profit margin of 8.7%. That was an increase in revenues from $83.7 million in 1996. Net income in 1996 was $3.8 million.
Scott Holste, a spokesman for the attorney general, said his office is reviewing the Cape Girardeau deal but has set no timetable for a decision.
Holste said he was not aware of any contacts between his office and federal agencies on the Cape Girardeau merger.
Winning enough public support is something the two private hospitals in Poplar Bluff, Lucy Lee Hospital and Doctors Regional Medical Center, failed to do.
In that case, the state attorney general rejected an offer to freeze prices and chose to side with the Federal Trade Commission in seeking a preliminary injunction to halt the merger. The FTC and the state attorney general won an injunction against the merger in July (Aug. 3, p. 3).
Tenet Healthcare Corp., the Santa Barbara, Calif.-based hospital chain that owns Lucy Lee Hospital and Doctors Regional, has appealed the court's decision to grant an injunction. The appeal is pending while the FTC pursues its administrative complaint to stop the merger (Aug. 24, p. 8).