FOR IMMEDIATE RELEASE                                          AT
WEDNESDAY, JUNE 11, 1997                           (202) 616-2771
                                               TDD (202) 514-1888


JUSTICE DEPARTMENT SUES TO BLOCK LONG ISLAND HOSPITAL COMBINATION     

 North Shore Health Systems and Long Island Jewish Medical Center 
Combination Likely to Lead to Higher Hospital Prices on Long Island


     WASHINGTON, D.C. -- The Department of Justice filed a civil
antitrust suit today to block the combination of two flagship
hospitals on Long Island--North Shore Health Systems and Long
Island Jewish Medical Center--because it would likely lead to
higher hospital prices and inhibit the development of competing
hospital networks on Long Island.

     "Today managed care companies serving Long Island have a
choice of anchor hospitals to include in their plans, and
competition between these two hospitals has benefitted Long
Island consumers," said Joel I. Klein, Acting Assistant Attorney
General in charge of the Department's Antitrust Division. 
"Unless this transaction is blocked, Long Island consumers will
face higher prices." 
 
     In its complaint, filed in U.S. District Court for the
Eastern District of New York, the Department said that North
Shore's flagship hospital, North Shore Manhasset, and Long Island
Jewish Medical Center are each other's principal competitor by
virtue of their premier reputations, comparable full range of
services and strategic location.  They compete head to head to be
the "flagship" or "anchor" hospital in the networks of hospitals
that managed care plans assemble on Long Island so that the plans
can offer a choice of health care options to area employers,
families and individuals.  

     The hospitals serve both Nassau and Queens Counties.  North
Shore Manhasset is located in Nassau County and Long Island
Jewish Medical Center is located in Queens County.

     Currently, a managed care company has the option of
including either Long Island Jewish Medical Center or North Shore
in its plan, or it can use a favorable price negotiated with one
to obtain a price concession from the other and offer both
hospitals in its plan.  In either event, competition between the
two hospitals keeps prices low, the Department said.

     According to the Department's complaint, if the proposed
transaction is allowed to go through, North Shore and Long Island
Jewish Medical Center will cease to compete for the business of
managed care plans.  Managed care plans will only have a single
entity to negotiate with, eliminating the bargaining that has
benefitted consumers of health care services.

     The complaint said that company documents acknowledge that
the transaction would "free both hospitals from the stress of
competition" and avoid the "threat of going  down the street' to
the competition."

     North Shore is one of the largest health care delivery
systems in the Northeast, consisting of nine hospitals with more
than 3,400 beds and revenues of about $1.8 billion.  North Shore
Manhasset is a prestigious, 729-bed teaching hospital that
competes vigorously with Long Island Jewish Medical Center--a
well-known and highly regarded 591-bed academic hospital located
only two miles away.  

     In its complaint, the Department also alleges that the
proposed transaction is contrary to the State of New York's
policy to promote competition among hospitals.  Since 1991, New
York has recognized and promoted the benefits of competition
among hospitals.  In September 1996, New York enacted legislation
that substantially eliminated state regulation of hospital prices
and permitted health plans to negotiate with New York hospitals
for competitive rates. 
 
     According to the complaint, the proposed transaction
represents the culmination of North Shore's longstanding efforts
to frustrate New York's policy.  Since 1993, North Shore has
acquired seven additional hospitals, expanding its Long Island
system to nine hospitals with more than 3,400 beds.  Long Island
Jewish Medical Center itself was concerned that these
acquisitions would "substantially lessen competition among Long
Island hospitals and give North Shore Network an overwhelming
dominance over HMO patients. . . ." 
     
     In December 1994, the Department charged North Shore with
orchestrating an agreement with six other Long Island hospitals
through a joint bargaining agent that they formed, Classic Care,
to prevent discounts for hospital services to managed care plans. 
That case was settled by a consent decree entered by the court in
May 1995, preventing the hospitals from engaging in certain
agreements involving fees or discounts with managed care plans.  
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97-242