Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS—D. Idaho: Expedited discovery into St. Luke’s divestiture plan granted, (Jul 15, 2015)

By Greg Hammond, J.D.

Following a determination that St. Luke’s acquisition of Idaho’s largest independent, multi-specialty physician practice group violated the Clayton Act and Idaho Competition Act, expedited discovery into St. Luke’s divestiture plan has been ordered by the federal district court in Boise. The court granted the plaintiffs’ motion to compel, finding expedited discovery would not be overly burdensome on St. Luke’s (Saint Alphonsus Medical Center – Nampa, Inc. v. St. Luke’s Health System, Ltd., July 13, 2015, Winmill, B.).

In December 2012, Idaho’s largest health care system, St. Luke’s Health System, acquired Saltzer Medical Group, Idaho’s largest independent, multi-specialty physician practice group. Two of St. Luke’s competitors, St. Alphonsus Medical Center and Treasure Valley Hospital Limited Partnership, filed suit and sought to block the transaction.

Following the private suit, the FTC and the Idaho Attorney General filed a complaint, seeking to halt St. Luke’s acquisition of Saltzer on the ground that the combined entity would have market power in the relevant market region to demand higher rates for health care services provided by primary care physicians. The cases were consolidated for discovery and trial. In January 2014, the court found that the acquisition violated the Clayton Act and Idaho Competition Act and ordered St. Luke’s to divest itself of Saltzer’s physicians and assets.

Expedited discovery. After the plaintiffs filed their motion to compel, St. Luke’s filed its divestiture plan, proposing to have the court determine if St. Luke’s will be allowed (1) to retain some of Saltzer’s physicians and staff; and (2) to take over operation of some lines of service that Saltzer no longer desires to maintain. Saltzer justified its divestiture plan, stating “serious discussions with three separate potential buyers” for Saltzer were unsuccessful, Saltzer physicians made an “independent” decision “for personal and professional reasons…to take back certain assets that are not needed to practice medicine as they have determined to do.”

The court disagreed that discovery is irrelevant and burdensome in this case, noting that St. Luke’s made inquiry into its justification relevant by offering it to explain their proposed plan, and that much of the financial data requested is already on hand, having been collected by Saltzer during preparation of its plan for future operation. The court further determined that privilege logs are a common part of discovery, and there was no data to back up St. Luke’s claim that the burden of providing a log would be “unreasonable.”

Lastly, St. Luke’s argued that discovery must be shielded from the private plaintiffs. The court, however, determined that discovery so designated will be kept confidential, and no confidentiality concerns warrant excluding the private plaintiffs from discovery.

Special master. St. Luke’s motion for a special master, arguing “what may have seemed like a simple, straightforward process at the time that divestiture was ordered, has proven not to be so,” was denied. The court noted the defendants’ representation at the beginning of litigation, that if the merger was allowed to proceed, the court could take “some comfort” in the defendants’ promise that “if the transaction is unlawful, we will not oppose the divestiture” because “[h]ere it would be quite possible to unscramble this egg.” Having relied on St. Luke’s promise, the court concluded that it should resolve the divestiture issues, not a special master.

The case numbers are 1:12-CV-00560-BLW and 1:13-CV-00116-BLW.

Attorneys: David A. Ettinger (Honigman Miller Schwartz and Cohn LLP) and Keely E. Duke (Duke Scanlan & Hall, PLLC) for Saint Alphonsus Medical Center – Nampa, Inc., Saint Alphonsus Health System, Inc., Saint Alphonsus Regional Medical Center, Inc., and Treasure Valley Hospital Limited Partnership. J. Walter Sinclair (Holland & Hart LLP) and Jack R. Bierig (Sidley Austin LLP) for St. Luke's Health System, Ltd. and St. Luke's Regional Medical Center, Ltd. Brian K. Julian (Anderson Julian & Hull) for Saltzer Medical Group. Douglas Eugene Litvack, FTC. Brett T. DeLange, Office of Attorney General.

Companies: Saint Alphonsus Medical Center Nampa Inc.; Saint Alphonsus Health System Inc.; Saint Alphonsus Regional Medical Center, Inc.; Treasure Valley Hospital Limited Partnership; St. Luke's Health System, Ltd.; St. Luke's Regional Medical Center, Ltd.; Saltzer Medical Group

Cases: AcquisitionsMergers Antitrust IdahoNews