AMSTERDAM — St. Mary’s and Amsterdam Memorial hospitals announced Tuesday the approval of a $20 million grant application from the state Department of Health to assist with merging the two institutions.

The hospitals applied for a HEAL-NY Phase 7 grant, which is available to help medical institutions restructure. The application was recently approved by Gov. David Paterson, the hospitals said in their announcement.

“We are gratified by the governor’s decision in choosing us for such a substantial award from the Department of Health to support our continued talks,” Donald W. Massey, president and CEO of Amsterdam Memorial, said in a statement released by the hospitals. “Our comprehensive application followed the goals of the state and was selected for its joint vision of a future where both hospitals will come together as a stronger health care provider with a configuration of services that are both sustainable and needed by the community.”

Officials from both hospitals signed a letter of intent to merge in August 2007. The proposal was supported by both hospital boards following a seven-month study.

At the time, neither institution had a way for financing a merger and money allowed for those hospitals mandated for closure or consolidation by the state’s Berger Commission was not available.

Neither merger nor closure of St. Mary’s and Amsterdam Memorial was recommended by the Berger Commission, which had recommended closing many medical facilities statewide, including Bellevue Woman’s Hospital in Niskayuna, which is now under the umbrella of Ellis Hospital.

The Amsterdam hospital boards now have 90 days to review the grant award and consider whether the obligations that come with the funding are feasible for the institutions.

“Every action we are taking is about putting patients first and emerging stronger for the future,” Victor Giulianelli, president and CEO of St. Mary’s Hospital, said. “This success has involved a leadership commitment from both hospital boards and their ability to look at what is best for our community.”

“Before acceptance of the HEAL award, the hospitals will need to carefully review the award and obtain final approval from their governing boards and sponsor organizations.”