The planned merger of Samaritan Health System and Lutheran Health Systems will dominate the suburban Phoenix market known as the East Valley.
The deal, announced last month, will create a 32-hospital system with control over three of the six acute-care hospitals, or 74% of the 1,375 inpatient beds in the East Valley, according to American Hospital Association data. The valley includes the cities of Chandler, Gilbert, Mesa and Tempe.
Possibly offsetting any anti-competitive concerns, the merged system's major competitor in the East Valley is for-profit Tenet Healthcare Corp., Santa Barbara, Calif., the nation's second-largest hospital chain.
Tenet owns two hospitals, 110-bed Tempe St. Luke's Hospital and 125-bed Mesa General Hospital Medical Center, which control more than 17% of the market's inpatient beds.
Steven Orr, chairman and chief executive officer of Fargo, N.D.-based Lutheran, said he isn't concerned about antitrust issues.
The systems plan to file for federal clearance, but at deadline it wasn't clear when that would happen. They expect a final agreement in three to six months.
"The denominator here is the Phoenix marketplace," said Orr, who will be chairman and CEO of the new, as-yet-unnamed system.
When nearby Phoenix is worked into the mix, it dilutes the merged system's market share.
According to the AHA Guide, Phoenix has 15 acute-care hospitals with 3,874 inpatient beds. The new system would own only one of those hospitals, 714-bed Good Samaritan Regional Medical Center.
Lutheran and Phoenix-based Samaritan last month said they signed a letter of intent to merge (Dec 21-28, p. 4). But the structure of the deal hasn't been decided. It could be a true asset merger, or Lutheran might buy Samaritan for the cost of the system's long-term debt, estimated at $282 million.
Lutheran has 28 hospitals, and Samaritan has four. The new system will span 14 states.
However the deal is set up, plans call for the new system to be governed by a 14-member board with equal representation from Lutheran and Samaritan.