Claiming an exemption from federal antitrust laws, a quasi-public corporation was on the verge Friday of capturing an acute-care monopoly in Cumberland County, N.C.
Making the deal particularly noteworthy is the release this week of a new study that says hospitals raise their prices quickly after a merger (See story, p. 2). In fact, merging public not-for-profit hospitals like the ones in North Carolina raises their prices nearly as much as those of for-profit hospitals.
In a deal scheduled to close at midnight last Friday, Cape Fear Valley Health System, based in Fayetteville, N.C., is buying the long-term lease of 133-bed Highsmith-Rainey Memorial Hospital, also in Fayetteville, from Nashville-based Columbia/HCA Healthcare Corp. for $37 million.
Through several predecessors, Columbia has leased the hospital from the county since 1981. Its 30-year lease of Highsmith-Rainey was set to expire in 2011.
Cape Fear Valley already leases Fayetteville's only other acute-care facility, 347-bed Cape Fear Valley Medical Center, which is also owned by the county. Cape Fear Valley and Highsmith-Rainey are also the only two acute-care hospitals in the county.
Highsmith-Rainey was originally in Columbia's Atlantic Group of 45 hospitals, which has fizzled out of existence following the sale of 21 of its hospitals to a consortium of not-for-profit hospital systems last year. Columbia has been selling the remaining hospitals in the group in a series of individual transactions.
In one pending deal, a public hospital system in Florida is also claiming a federal antitrust exemption to buy two Columbia hospitals, giving it control of three of the area's four hospitals (See story, p. 18).
Clinton Weaver, spokesman for Cape Fear Valley, said the North Carolina attorney general's office has approved the sale.
Weaver also said the system didn't seek federal antitrust approval for the purchase from Columbia, because the system is a quasi-public corporation. The county created the system in 1964 to run its two hospitals.
Under the legal doctrine of "state action immunity," corporations or activities that are created by the state and supervised by the state are exempt from federal antitrust scrutiny.
Weaver said Cape Fear Valley expects to save $25 million over five years by consolidating services. None of Highsmith-Rainey's employees will be laid off as a result of the sale, he said.