BLUFF HOSPITAL MERGER OPPOSED

The Federal Trade Commission is trying to block the proposed merger of Poplar Bluff's two hospitals.

The FTC said Thursday the proposed merger between Lucy Lee Hospital, owned by Tenet Healthcare Corp. of Santa Barbara, Calif., and Doctors Regional Medical Center, owned by Poplar Bluff Physician Group Inc., will amount to "a virtual merger to monopoly."

The FTC is seeking a federal court order to block the pending merger, arguing that if it goes through, the combined firm will control 78 percent of the market for acute-care inpatient hospital services in and around the Butler County area.

If the merger is allowed, the FTC argues, consumers would not turn to other hospitals should the combined entity decide to raise prices, and the other hospitals in the immediate area are "far smaller" and do not offer the same types of services available at Lucy Lee and Doctors Regional.

The merger would enable the combined entity to exercise market power and raise prices, the FTC alleges.

"Today, consumers in Poplar Bluff can choose between two financially strong hospitals," said William J. Baer, director of the FTC's Bureau of Competition. "This acquisition would eliminate price, cost and quality competition that now exists between these two hospitals and put consumers at risk of paying more for health care. That is why the commission is asking the district court to block the merger and preserve for consumers the benefits of competition."

The Missouri attorney general's office will file a preliminary injunction today in federal court in Cape Girardeau to try to block the merger, said spokeswoman Mary Still. "Our goal is to ensure that consumers continue to have health-care choices and affordable health care, and this merger would be a threat to that," Still said.

Tenet, which owns 124 general acute-care hospitals around the nation, argues that allowing the merger will improve health-care services in the community by strengthening the two hospitals.

"Our goal is very clear. We want to make more efficient use of the two underutilized hospitals in Poplar Bluff," said Teresa Huskey, director of strategic communications for Tenet Healthcare Corp.

Hospital utilization is "well below capacity," Huskey said, adding that data showed only 33 percent of the beds at Doctors Regional were occupied last year, while occupancy at Lucy Lee was less than 50 percent.

She said merging the two hospitals would help improve performance against "stiff competition" in the regional health-care market, which includes Cape Girardeau, Arkansas and Memphis.

The merger would allow Tenet to add services not available in Poplar Bluff "and dramatically increase health-care services in the region" without raising costs, Huskey said.

"Over the next three to five years, Tenet's plans would be to introduce cardiac surgery, neurosurgery, neonatal services, advanced trauma services and high-risk obstetrics," she said. "But we can only do that if we can make more efficient use of the two existing hospitals."

Tenet's own data indicate that about 30 percent of the health-care consumers in the hospitals' service area now seek treatment outside Poplar Bluff, Huskey said.

If the merger goes through, Tenet won't be able to raise prices in the market area because 90 percent of the respondents to a Tenet survey indicated they would seek treatment elsewhere if prices went up, she said.

Huskey said Tenet offered to freeze health-care prices for five years after the merger, "and that offer was ignored by the FTC and the attorney general's office."

She said Tenet will contest the FTC's actions, "and we believe that the transaction will be approved in the courts."

The FTC will seek a temporary restraining order and preliminary injunction to block the merger until an administrative hearing can be held on the alleged antitrust law violations.

In Cape Girardeau, Southeast Missouri Hospital and St. Francis Medical Center are discussing a possible permanent affiliation.

"We're not deterred in our efforts by the FTC findings in Poplar Bluff," said James Sexton, president and chief executive officer of St. Francis Medical Center. Sexton said there are "structural differences" between the two situations.

He pointed out that in Poplar Bluff the two hospitals are both for-profit organizations. Both of Cape Girardeau's hospitals are not-for-profit.

Jim Wente, administrator of Southeast, said both Cape Girardeau hospitals are locally owned and controlled. "That's a big difference," he said.

Sexton and Wente said they think Southeast and St. Francis will be successful in gaining community support for the proposed affiliation.

Sexton said Tenet's plan to add more intensive health-care services "only serves to exemplify what I've been saying all along, that competition is not local only. Obviously, they want to compete with Jonesboro, Ark., and Cape Girardeau, Mo."

Sexton has stressed throughout the affiliation process that hospitals in the region operate in a "very large competitive area" for consumers.

Wente said the threat of increased competition from Poplar Bluff is "one more example why the two hospitals should be working together for the good of the community," he said.

Wente and Sexton have both raised the possibility that if a large, out-of-town health-care system such as Tenet buys one of the local hospitals, some services could be moved out of Cape Girardeau to St. Louis.

He also pointed out that while the FTC has been moving to block hospital mergers around the nation, federal courts have been siding with the hospitals.

And continued consolidation of hospitals means a smaller funding pool is available to support health-care services. All of those factors indicate "competition is going to get keener, and those are all reasons we think our affiliation is going to be successful," Wente said.