Attorney General Lori Swanson is raising concerns about the impact on competition from a possible merger between two large primary care providers in the St. Cloud area.

In an interview this week, Swanson said her office has launched an antitrust review of a potential acquisition by CentraCare of St. Cloud Medical Group, and asked the parties to delay any closing.

In a statement, CentraCare officials said they have been pursuing a potential "integration" with St. Cloud Medical Group since mid-2015 with the goal of improving the quality of patient care.

CentraCare said the merger would not materially impact its payments from health insurers, but regulators have been scrutinizing how health care consolidation in markets across the country could boost health care costs.

"Our review to date has identified concerns about the adverse impact of the acquisition on competition in the primary care market in central Minnesota," Swanson said.

CentraCare is one of the 10 largest operators of hospitals and clinics in the state, with about 263 physicians and 85 advanced practice providers, according to a financial statement. For the fiscal year ending June 2015, CentraCare posted operating income of $63.2 million on $1.1 billion in revenue.

St. Cloud Medical Group, which includes about 60 providers, issued a statement Wednesday saying integration makes sense since CentraCare operates the only hospital in St. Cloud. Several physician retirements on the horizon will create a recruiting challenge, the group said, because it "cannot offer a loan forgiveness program and compensation that large systems can offer."

A 2014 report card from a Minneapolis-based nonprofit called Minnesota Community Measurement found St. Cloud Medical Group was one of the eight lowest-cost medical groups in the state. Like most health care providers surveyed, CentraCare earned an "average" score in the group's report, which looked at total cost of care at 115 medical groups.

Swanson said the medical groups in St. Cloud have agreed to hold off on any closing until late April. But in its statement, CentraCare said it is "not accurate to state that we are delaying closing at the [attorney general's] request."

"This is an important milestone to all of us and we had not determined a definite closing date," the health system said.

A Star Tribune analysis of primary care networks at three different health insurance companies suggests the combined group would control a large chunk of primary care in the St. Cloud area — anywhere from 50 to 80 percent of clinics or providers, depending on the network.

In its statement, CentraCare officials said such counts will become irrelevant as insurance companies start paying doctors and hospitals based on the value of care provided, as opposed to the volume of services. Plus, the definition of who provides primary care in a market is changing, CentraCare says, as more health care groups provide online care or utilize retail clinics.

"Integration means common health record systems, coordinated care, improved decisionmaking, better utilization of resources and a unified approach," the health system said in a statement. Patient choice would not be harmed, officials said, because St. Cloud patients already have access to care at systems in the Twin Cities and Rochester.

Swanson, however, said that what matters from an antitrust perspective is competition in the local market. Even with value-based payments, courts are still interested in how increased market clout by health care providers, Swanson said, can help them negotiate higher rates from insurers.

"In weighing the potential anti-competitive impact of a health care consolidation, courts analyze not only before-and-after head counts of providers but also the impact of the merger on reimbursement rates paid by insurers and the ability of primary care providers to influence referral patterns," Swanson said.

Health insurers Blue Cross and Blue Shield of Minnesota and Medica declined to comment on the proposed merger. But in a general statement on consolidation, Blue Cross said it "strongly believes that the remaining independent practices are essential to holding the line on costs."

In 2013, the Federal Trade Commission (FTC) and the attorney general in Idaho moved to block a merger between what regulators said were the two largest clinic operators in that state. Regulators won the court case, and the ruling in December was upheld on appeal.

In their original lawsuit, regulators argued that the merger created one provider with nearly 60 percent of the market for adult primary care services.

Twitter: @chrissnowbeck