Palmetto Health and Greenville Health

Palmetto Health and Greenville Health System announced a merger on June 15.

Two decades ago, health care costs were increasing and out-of-state hospital companies were trying to push their way into South Carolina.

In response, hospitals in Greenville, Spartanburg and Anderson proposed a merger and took their idea to a public vote.

Leaders argued at the time that a regional system would make the individual hospitals stronger and would allow them to stand firm against a for-profit takeover. 

"Our vision is to raise the health status of the people of the Upstate, not enrich our shareholders," one Greenville hospital executive told The Wall Street Journal in 1996.

Public backlash to the proposal was swift. Business leaders opposed the idea because they believed the merger would create a monopoly. Doctors and smaller Upstate hospitals voiced similar concerns. An ad campaign launched before the November referendum likened the proposed merger to an "800-pound gorilla" that would restrict patient choice and drive health care prices even higher.

The public ultimately voted the plan down and the hospitals abandoned the idea. 

No such referendum was held ahead of the June 15 announcement that Palmetto Health in Columbia, and Greenville Health System, plan to forge a similar partnership, creating one new company under which both hospital systems will operate.

If approved by the Federal Trade Commission, health care experts say the new company would become the largest private employer in South Carolina, generating nearly $4 billion a year, and would represent the biggest hospital deal ever negotiated in the state, topping both the 1997 merger of Roper and Bon Secours St. Francis hospitals in Charleston and the 1998 merger of Richland Memorial Hospital and the Baptist Healthcare System in Columbia.

And while hospital leaders won't call this new arrangement a "merger," the proposed plan isn't exactly unique as hospitals across the country increasingly band together to navigate an uncertain future. 

During the first six months of 2016 alone, one consulting firm tracked 52 similar hospital mergers and acquisitions in the United States. 

"This is going on all over the country," said Thorton Kirby, president of the S.C. Hospital Association. "We are, like all other states, seeing health care providers being put under a lot of stress."

'Better together'

Some of those stressors include higher prices for both drugs and devices that hospitals have little leverage to negotiate, Kirby said, as well as federal regulations that force hospitals to focus on providing high-quality health care. All this comes as those in Congress negotiate a new health care bill that could drastically change the industry. 

"Regardless of the headwinds that are out there in the health care arena, people are going to need good quality care, they’re going to need access to care and they’re going to need care they can afford,” said Charles Beaman, CEO of Palmetto Health. “We can do all three better together (with Greenville Health System) than we could singularly.”

Meanwhile, other hospital leaders are watching the proposed deal, but aren't saying much.

A spokeswoman for Spartanburg Regional Healthcare System did not return a message about the proposal, and a spokeswoman for Lexington Medical Center said leaders there couldn't discuss it because they "don’t know a lot about the details of the plan ... or how it’s going to work." Executives at Roper St. Francis and Trident Health also declined to talk to The Post and Courier about the arrangement. 

Medical University Hospital CEO Pat Cawley said the plan seems like a natural extension of a close working relationship that the Columbia and Greenville hospital systems have already developed and that it doesn't change much for MUSC. 

"We have to pay attention to it," Cawley said. "But at the end of the day, if we do all the things we need to do, I don’t think it will affect us."

But it could affect negotiations with insurance companies — one of the reasons why Jim Ritchie, executive director of the S.C. Alliance of Health Plans, said the insurance industry is paying close attention to the proposal.

He cited research that shows hospital consolidations often spell higher prices.

"Prices tend to rise and choice is reduced," he said. "Costs are not going up; prices are going up in these situations."

Ritchie, a former Republican state lawmaker, said his trade group, which represents health insurance companies in South Carolina, has not discussed the proposal or decided if they will formally oppose it. 

Patti Embry-Tautenhan, a spokeswoman for BlueCross BlueShield of South Carolina, commented through a prepared statement: “The health care marketplace continues to evolve and this action is the latest iteration of that evolution," she said. "Both organizations have been good partners to us, and we are keenly interested in learning more details of this new relationship.”

Beaman, of Palmetto Health, and Michael Riordan, CEO of Greenville Health System, agreed that consumers, businesses and insurers will not bear higher prices and they should not expect prices to increase under the new arrangement. 

"There just isn’t the capacity at the federal or the state level for increased prices," Riordan said. "Those days are sort of gone."

The partnership is intended to keep South Carolina hospitals competitive, he said, not to raise prices. 

"This is a South Carolina-first strategy," Riordan said. "I like Georgia and North Carolina, I just don’t want our patients to have to go there."

'Strong competition'

Hospital leaders want to finalize the deal by the end of the year, but the FTC, which scrutinizes hospital mergers and acquisitions to vet anti-competitive practices, must sign off on the proposal. It's not yet clear if, or when, that will happen. 

Last year, the FTC challenged the proposed merger of two hospital systems based in Tennessee. In March, two hospital systems near Chicago abandoned their proposal to merge amid FTC concerns. 

While the hospital systems in Greenville and Columbia have not submitted paperwork to start the federal review process, health care experts in South Carolina don't anticipate many problems because Palmetto Health and Greenville Health System operate in separate markets and hospitals outside the new network will remain open throughout the Upstate and Midlands.  

"My office is 100 miles away from (Beaman's) office," said Riordan. "We think there is still very strong competition."

A spokeswoman for the FTC said the agency would not comment on a proposed hospital merger.

Kirby, the hospital association president, said he didn't know if the FTC would find the proposal "troubling or not," but remained optimistic the deal would benefit everyone involved. 

"There are a lot of great people who work in these two systems," Kirby said. "It puts a lot of great people in business together. That’s never a bad thing for patients or for the state."

Sign up for our daily newsletter

Get the best of The Post and Courier, handpicked and delivered to your inbox every morning.

Reach Lauren Sausser at 843-937-5598. 

Lauren Sausser is the Features Editor at The Post and Courier. She also covers health care issues in South Carolina.

We're improving out commenting experience.

We’ve temporarily removed comments from articles while we work on a new and better commenting experience. In the meantime, subscribers are encouraged to join the conversation at our Post and Courier Subscribers group on Facebook.