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

The hospitals applied for a HEAL-NY Phase 7 grant, which helps medical institutions restructure. The application was recently approved by Gov. David Patterson.

"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 Hospital, 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 initiative was supported by both hospital boards following a seven-month study.

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

St. Mary's and Amsterdam Memorial were not recommended for consolidation or closure by the Berger Commission, which recommended closing many medical facilities statewide, including Bellevue and St. Clare's hospitals in Schenectady, which are now under the umbrella of Ellis Hospital.

The hospital boards now have 90 days to review the grant award and consider whether obligations associated with the award will be feasible for the institutions.

"Every action we are taking is about putting patients first and emerging stronger for the future," said Victor Giulianelli, president and CEO of St. Mary's Hospital. "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."