Attorneys for two of the largest hospitals in the San Francisco Bay area went to the mat with state officials last week in a classic antitrust battle over a controversial merger.
During a weeklong trial in U.S. District Court in San Francisco, the hospitals and the state painted widely differing market pictures, and one hospital claimed it would be a death sentence for it if the merger didn't proceed.
Now the fate of the proposed merger between 420-bed Summit Medical Center, Oakland, and 555-bed Alta Bates Medical Center, Berkeley, part of Sacramento, Calif.-based Sutter Health System, rests in the hands of U.S. District Judge Maxine Chesney.
The trial for a preliminary injunction to block the merger was expected to wrap up with closing arguments Nov. 1. Chesney's decision is expected to take several weeks, said California Attorney General Bill Lockyer.
"We're liking the way it's progressing," Lockyer told MODERN HEALTHCARE last week about the trial.
Lockyer filed an antitrust lawsuit in August to block the Summit-Alta Bates merger, contending it would raise prices, reduce services and "create an unacceptable concentration of hospital ownership" for Sutter (Aug. 16, p. 2). Lockyer filed the lawsuit after the Federal Trade Commission decided not to challenge the deal.
Sutter, a 26-hospital system, already owns nine hospitals in the greater San Francisco Bay area.
In the proposed deal, Sutter would acquire Summit for $409 million, including the assumption of $152 million in debt, then merge the operations of Summit and Alta Bates into a single hospital with two campuses, according to the attorney general's office.
"We're pleased to have the opportunity to present what we think is a very compelling case," said Bill Gleeson, Sutter's spokesman.
At the heart of the case is defining the geographic market within which the merged hospitals would compete.
The state argues competition is limited to a narrow geographic market that includes parts of Contra Costa and Alameda counties-an area that lies roughly between the eastern shore of San Francisco Bay and the Oakland-Berkeley Hills.
But according to the Oakland Tribune, the hospitals say their competitors cover a much broader geographic market, which includes hospitals in San Francisco and Palo Alto, Calif., west of San Francisco Bay.
The scope of the geographic market the hospitals are putting forth differs from one Summit described in a 1996 bond document. In that, Summit identified only hospitals on the eastern side of San Francisco Bay as competitors.
In court, Summit's Los Angeles-based lawyer, Maureen McGuirl, said the hospital is "on the critical list with no prospects for recovery aside from this merger," the Oakland Tribune reported.
But attorneys for the California attorney general's office have argued that Summit had options other than joining forces with its chief rival.
According to the Oakland Tribune, the state called as one of its witnesses an executive from Santa Barbara, Calif.-based Tenet Healthcare Corp., who said Summit rejected an acquisition by Tenet in 1998.