Antitrust Law Daily Wrap Up, ANTITRUST NEWS: FTC to Challenge Combination of Idaho Healthcare Entities, (Mar 12, 2013)

By Tobias J. Gillett, J.D., LLM.

The FTC and the Idaho Attorney General will file a complaint today, seeking to halt St. Luke’s Health System, Ltd.’s acquisition of Saltzer Medical Group, P.A. on the ground that the combined entity would have market power in the Nampa, Idaho region to demand higher rates for health care services provided by primary care physicians, the FTC has announced.

St. Luke’s is an Idaho not-for-profit health system that operates six hospitals, while Saltzer was Idaho’s largest independent, multi-specialty physician practice group with 44 physicians, according to the FTC. Effective on December 31, 2012, St. Luke’s acquired all of Saltzer’s personal property and equipment. St. Luke’s also obtained the ability to negotiate health plan contracts on Saltzer’s behalf, and the power to establish rates and charges for services provided by Saltzer physicians. Saltzer also entered into a five-year professional services agreement with St. Luke’s on behalf of its physicians.

The FTC’s complaint will charge that the combination of the companies violated Section 7 of the Clayton Act and the Idaho Competition Act. The FTC claims the transaction created a “combined entity commanding nearly a 60 percent share” of the market for adult primary care physician services in the Nampa, Idaho area and that “an alternate network of health care providers that does not include St. Luke’s/Saltzer’s primary care physicians becomes far less attractive for employers with employees living in Nampa.”

The FTC and the Idaho Attorney General allege that higher prices for consumers will result from St. Luke’s greater bargaining power vis-à-vis health care plans. The agencies also contend that the acquisition will eliminate the ability of health plans to construct an alternative network to St. Luke’s with physicians from Saltzer and St. Alphonsus Medical Center, a health system that competes with St. Luke’s.

“St. Luke’s acquisition of Saltzer Medical Group has created a dominant single provider of adult primary care physician services in Nampa, with a nearly 60 percent share of the market,” said Richard Feinstein, Director of the FTC’s Bureau of Competition. “The result of the acquisition will be higher prices for the services that those physicians provide, with costs ultimately passed on to Nampa employers and their employees.”

Private Suit. The action by the FTC and the Idaho Attorney General follows a private lawsuit filed on November 12, 2012, by two of St. Luke’s competitors, St. Alphonsus and Treasure Valley Hospital Limited Partnership, also seeking to block the transaction. On December 20, 2012, the federal district court in Boise denied the competitors’ motion for a preliminary injunction against the acquisition, but noted that “the gradual integration and the built-in unwinding process mean that the Court will have no difficulty in ordering an immediate and complete divestiture if that is the result compelled at trial.”

The court has scheduled trial in the case to begin on July 29, 2013. The FTC and the Idaho Attorney General will file their suit in the same court, and the FTC has stated that it has authorized its staff “to ask the district court to consolidate the two actions for discovery and trial.”

St. Alphonsus previously indicated its desire for a prompt resolution of the dispute, and its intent to “cooperate with the ongoing investigations by the Federal Trade Commission and the Idaho Attorney General.”

St. Luke’s Response. St. Luke’s issued a press release, expressing its dismay at the decision of the FTC and the Idaho Attorney General to file suit, and indicating its intention to “prove [its] points in the federal court in Boise.”

“St. Luke’s is extremely disappointed by the FTC’s and AG’s decision to file suit,” the statement read. “St. Luke’s and Saltzer affiliated because each of us believes that the coordinated delivery system that we are creating through the affiliation, will improve care for patients, help to contain costs, and ensure better health outcomes for the people we serve.”

Companies: St. Luke’s Health System, Ltd.; Saltzer Medical Group P.A.

News: Antitrust FederalTradeCommissionNews