The Federal Trade Commission has launched an antitrust investigation into the proposed merger of the two largest hospitals in the Oakland, Calif., market.
The federal probe comes on top of a pending antitrust investigation by the the attorney general's office in California.
The hospitals are 555-bed Alta Bates Medical Center in Berkeley and 420-bed Summit Medical Center in Oakland.
The multipart transaction calls for Sacramento, Calif.-based Sutter Health to acquire Summit for an undisclosed amount and merge Summit's operations with Alta Bates' operations. Sutter already owns Alta Bates.
Given the size of the deal, hospital executives have long anticipated an antitrust review by state and federal lawmakers.
Both hospitals are profitable, according to hospital records. Summit earned a $220,000 profit on revenues of $214 million for the fiscal year ended Feb. 28, 1998. Alta Bates earned $3.4 million on revenues of $330 million in 1997.
"We have been preparing for a second filing with the FTC and are pleased that the process is moving ahead," said Irwin Hansen, Summit's chief executive officer. Hansen is the designated CEO for the merged organization.
The hospitals filed their required premerger notification documents with the FTC on Dec. 30, 1998. The agency had 30 days to clear the deal, challenge it in court or launch an investigation by making a so-called "second request" for information. That second request came Jan. 29.
Typically, the FTC requests extensive financial and utilization information from merging hospitals, as well as extensive documentation about their merger plans.
Sutter spokesman Bill Gleeson said the system expects that it will take several months to compile the information requested by the FTC. There is no formal deadline for submission.
Under terms of the proposed deal, the two hospitals will form a single, not-for-profit corporation run by a 23-member board (Jan. 11, p. 32). Complete financial terms of the deal were not disclosed, but Sutter has agreed to invest $450 million in the two facilities over the next 10 years.