We need to demonstrate to the AG [Attorney General] that our proposed merge is in the best interest of the Wheeling community. With health care costs receiving national attention, and changes in health care purchasing and delivery accelerating in anticipation of national reform, we feel the merger is strategically necessary in preparation for the future. The new, larger group of cardiologists will conceivably be able to provide higher quality cardiology services at lower costs. This will be made possible by pooling expertise, sharing resources, and taking advantage of economies of scale. In turn, this enables the group to negotiate managed care contracts on an even playing field with comparable groups, as well as to pass along cost savings to the consumers.
Your presentation to the AG should be clear, concise, and convincing. More specifically, the benefits to purchasers and patients should be outlined and supported with specific evidence. Furthermore, any potential concerns by the AG regarding anti-competitive behavior should be alleviated.
Stanley F. Erickson, Esq.
Leonard, Certain, Finn, and Eddy
Melanie Ames, a consultant with The Meyers Group, had received Mr. Erickson’s letter a month ago, but with her presentation to the Attorney General of West Virginia only two days away, she wanted to make sure she met the lawyers’ demands. After rereading the letter, Ms. Ames was confident that the research she had done was sufficient to develop a convincing argument. She gathered all her files on the merger and began to construct the main points for her presentation.
Cardiology services can be divided into advanced and general procedures. Advanced procedures are provided by cardiovascular sub-specialists, and typically are not available at community hospitals. They include both invasive and non-invasive procedures such as coronary arteriography, angioplasty, atherectomy, myocardial biopsy, balloon valvuloplasty, electrophysiologic studies, defibrillator implantation, stress and trans-esophageal echo-cardiography, and nuclear cardiologic services. General cardiology services are provided by general cardiologists and internists. Procedures include such non-invasive services as ECG reading, pacemaker insertion, and right heart catheterization. There were 71 practicing cardiologists in West Virginia. Of these, 12 performed angioplasties, 40 performed left heart catheterization, and 56 provided advanced cardiological services.
National trends suggested that the market for cardiological services was becoming more regional. “Centers of Excellence” were being established to provide high levels of care to a large population base. Additionally, managed care providers were contracting with the lowest-priced providers, even if subscribers needed to travel for the service. As an example, U.S. Air, shopping for the best value, required all employees in West Virginia to go outside the state to obtain low cost, quality cardiovascular care.
The Merger Proposal
The three groups in the merger included the West Virginia Cardiology Associates . . .
- Is the proposed merger a good idea? Why or why not?
- Regardless of your answer to Question 1, what should Ms. Ames say to convince the attorney general that the merger will be beneficial to the citizens of West Virginia?
- How should Ms. Ames address the anti-trust issue?
- Assuming she thinks the merger is a bad idea, what should Ms. Ames do?