Retreating in the face of opposition from the state, the only two hospitals in Cape Girardeau, Mo., have quickly ended their merger plans.
Missouri Attorney General Jay Nixon had said earlier he opposed the merger of 243-bed Southeast Missouri Hospital and 264-bed Saint Francis Medical Center, claiming the deal would cripple competition among area healthcare providers (Jan. 11, p. 4).
Nixon threatened legal action to stop the merger, which was announced last fall (Oct. 5, 1998, p. 22).
Saint Francis' board of trustees unanimously voted to halt the merger at a late afternoon meeting Jan. 8, just 24 hours after Nixon announced his opposition.
"We looked at three options," said James Sexton, Saint Francis' chief executive officer. "We could let all discussions die. We could suspend the discussions and have our consultants and attorneys stand down. Or we could pursue the issue with the U.S. Justice Department."
The trustees decided that pursuing the deal aggressively would be "a brash statement," Sexton said.
Sexton, who is leaving his post Feb. 5 to become CEO of 285-bed North Iowa Mercy Health Center in Mason City, said the board would have had difficulty hiring a new CEO with a merger in jeopardy.
Scott Holste, Nixon's spokesman, said the attorney general was satisfied with the hospital's decision. "This deal was not going to provide enough choice for healthcare consumers," he said.
Thomas Campbell, an antitrust attorney for the hospitals, acknowledged that there had been some "vocal opposition" to the deal.
At a public hearing in September, some local employers, including Procter & Gamble Co., spoke out against the merger, saying it would increase their healthcare costs.
James Wente, CEO of Southeast Missouri, said he is disappointed that the merger won't happen.
"Hopefully this (merger idea) will be revisited in the future, maybe two or three years down the road," Wente said. "I'm not saying it will be, but I don't want to rule it out."
Both hospitals have received overtures from out-of-town systems eager to partner with or purchase them.
The hospitals had not filed for antitrust clearance with federal or state authorities. They had circulated a "community commitment," a document promising a price freeze, a rate freeze for payers and savings of at least $44 million over the next five years if the deal went through.
Southeast Missouri and Saint Francis both enjoyed profit margins of more than 7% in 1997, according to HCIA, a Baltimore-based healthcare information company.
Both hospitals were worried about meeting the fate of their peers 85 miles away in Poplar Bluff, Mo.
In that case, Nixon's office sided with the Federal Trade Commission, which sued to block the marriage of the only two private acute-care hospitals in Poplar Bluff (April 20, 1998, p. 2).
The state and federal governments got a preliminary injunction last August from federal district court to block the Poplar Bluff deal pending the resolution of the FTC's antitrust complaint against the hospitals.
The hospitals quickly appealed to the 8th Circuit of the U.S. Court of Appeals in St. Louis (Aug. 17, 1998, p. 18). The court heard oral arguments Dec. 14, and both sides await a decision.
The FTC's administrative complaint against the hospitals is pending and has not yet been heard by a federal administrative law judge.