Thursday, November 02, 2006

San Angelo’s Hospital Merger Mania

Dear Justice Department Representative,

Last week, Shannon Health System and Triad Hospitals announced the merger of our only two hospitals, the result being San Angelo will no longer have a nonprofit community hospital. My article in the newspaper sums up my concerns.

Misguided Merger: Shannon Transformation Won’t Benefit City

Several issues not mentioned in the article include, whether the new privately held company will employ Quorum Health Resources, a division of Triad, for management services. Should this be the case, the merged entity will not only take on $2 million in new local taxes, it will be burdened with a management fee as well. This will provide Triad with another contract layer, further increasing profits. Recall the layers of contractors post Hurricane Katrina, each with their profit objective. This more than wiped out any savings from quick approval of no bid contracts.

If any easy $2 million in savings could be quickly accomplished, the experienced management team at Shannon (many are ex-HCA/Triad employees) would have already snatched them. Triad will cut staff and possibly programs/services to achieve their profit goals.

My second concern requires a group such as yours to investigate. How will previous volunteer community board members be treated in the new private for-profit company? Gifts of stocks to key board members have been common in past mergers/acquisitions. Are any Shannon Medical Center board members benefiting financially from the turning over of a community asset to a for-profit corporation?

Will any public meetings be held on the merger by the Justice Department or FTC? I understand case history shows most mergers are readily approved, however San Angelo's health care marketplace could be dramatically changed to the detriment by this merger for our community's 28% uninsured. Your organization even referenced this in Chapter 4 Competition Law: Hospitals of a 2004 Report, Improving Healthcare: A Dose of Competition.

Nonprofit hospitals may have different long-term missions and have a different level of public accountability because of their long-term community obligations.175 There is some empirical evidence that institutional status affects the mix of services provided by a hospital.

For that reason it warrants scrutiny, open dialogue, and honest accounting for how care for those needing medical services from a safety net facility will change. I would like to trust the Justice Department to help provide such an environment, but have been concerned by the federal bias (at least Congressional) towards for-profit healthcare companies.

Please write me back with answers to my questions. Sincerely,

State of the Division

It turns out I didn't have to hold my breath for more than a day as the Justice Department replied to my e-mail. It is below:

Dear Mr. State:

Thank you for contacting the Antitrust Division of the U.S. Department of Justice. The function of the Citizen Complaint Center is to receive, review and file complaints and/or concerns from citizens. We are prohibited from providing legal advice or answering questions about the legality of certain situations so unfortunately we are unable to answer your questions. However, we have forwarded your concern to the appropriate legal staff for further review and should they need additional information, they may contact you in the future. We appreciate your interest in the enforcement of federal antitrust laws.

Citizen Complaint Center
Antitrust Division
Department of Justice.

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