The Montana attorney general has eased restrictions worth more than $90 million on Benefis Healthcare because the two-hospital monopoly in Great Falls, Mont., isn't making money.
Benefis successfully argued to the state that antitrust-agreement limits on the system, which allowed Great Falls' only two acute-care hospitals to merge in 1996, will contribute to a combined $9 million loss in 1998 and this year.
Montana Deaconess Medical Center, with 339 staffed beds, and 145-bed Columbus Hospital formed Benefis after receiving a "certificate of public advantage" from the state after a lengthy administrative process. The COPA, the first of its kind granted by a state to two merging hospitals, gave the facilities an antitrust exemption in exchange for limits on Benefis' business activities. The COPA effectively killed a federal antitrust investigation of the monopoly hospital merger.
Benefis petitioned the attorney general's office to reopen the COPA and modify some of the restrictions, saying the provisions were financially killing the system (Feb. 8, p. 17).
And late last month the state agreed to the major concessions sought by Benefis.
The first, which will result in an additional $51 million in revenues through the year 2006, allows the hospitals to raise their prices at a faster rate than allowed in the original agreement.
The original agreement limited price increases to changes in the hospital component of the U.S. Labor Department's Producer Price Index, which measures changes in wholesale prices. The revised agreement, retroactive to 1997, will allow the hospitals to raise their prices equal to changes in the "marketbasket index," which HCFA uses to track changes in the prices hospitals pay for a common set of goods and services.
Another $39.5 million in concessions comes from the state's agreement to lower the promised savings estimate of the two-hospital merger. Under the COPA, Benefis would have to pay the state in cash any unrealized savings over the 10 years of the agreement.
In the COPA, Benefis had originally agreed to $109.2 million in savings, but the state agreed to reduce that amount to $69.7 million. The additional costs of hiring more workers will reduce that projected savings estimate. Benefis requested and the state agreed to allow the system to employ 5.71 full-time employees per occupied bed, compared with 5.46 employees in the original agreement.
The state denied a handful of minor changes in the COPA that Benefis had requested.
Benefis and attorney general officials weren't available for comment.