Federal court denies St. Luke's bid to rehear antitrust case

The U .S. Court of Appeals for the Ninth Circuit Tuesday denied a petition to rehear the antitrust case involving an Idaho health system's purchase of the state's largest independent physician practice.

In February, St. Luke's Health System in Boise lost its first-round appeal before the Ninth Circuit, where a panel of three judges upheld a District Court ruling that St. Luke's violated antitrust laws when it purchased the Saltzer Medical Group of Nampa, a practice of 40 physicians, and ordered it to unwind the acquisition. In that ruling, Judge Andrew D. Hurwitz said the 2012 merger violated the Clayton Act, which bars mergers that may substantially lessen competition or create a monopoly.

The Federal Trade Commission, the Idaho attorney general and the system's competitors--St. Alphonsus Health System and Treasure Valley Hospital--claimed the merger gave St. Luke's an unfair and illegal marketplace advantage by dominating primary medical care in the area, likely driving up prices. 

The case was widely watched as it was the first to go on trial to challenge a health system acquisition of a physician practice since the passage of the Affordable Care Act and has national implications for physician referrals and competition in the marketplace.

Last month, St. Luke's Health asked the Ninth Circuit to rehear its case before a full panel of judges. The system received the support of 17 law professors, who two weeks ago filed an amicus brief stating they were concerned that the court's decision could prevent or undo beneficial mergers.

But Circuit Judges Richard R. Clifton. Milan D. Smith, Jr. and Hurwitz Tuesday denied the petition for rehearing the case, and no judge requested a vote on a potential rehearing before a full panel of judges. 

David A. Ettinger of Honigman Miller Schwartz and Cohn LLP, which represents St. Alphonsus, told FierceHealthcare Tuesday afternoon that the denial for the rehearing provides further support for the District Court's judgement that the acquisition was anticompetitive.

"The Ninth Circuit effectively rejected St Luke's argument that the decisions against it by Judge Winmill and the Ninth Circuit were based on controversial legal principles," he said. "In fact, these courts applied well settled law to a very strong evidentiary record. Where, as in this case, a transaction results in a high market share with significant barriers to entry, and where the claimed efficiencies can be achieved without an acquisition, the transaction is very likely to be viewed as unlawful. "

St. Luke's could appeal the decision to the Supreme Court but, typically, the high court will only hear cases that involve conflicting opinions made by U.S. circuit courts. In St. Luke's case, all the courts have sided or upheld the decisions made in the case so far.

But  David Balto, an antitrust attorney and former policy director for the Federal Trade Commission who filed the amicus brief on behalf of the professors, told FierceHealthcare Wednesday that the case "cries out for a review by the Supreme Court." The case, he said, reveals a conflict involving sound public policy, the goals of healthcare reform and antitrust enforcement. "The result of the integration is that those doctors have been able to provider greater care and a greater amount of care to underserved individuals in the market," Balto said.

Furthermore, he said, the Ninth Circuit made a mistake by questioning whether quality goals are cognizable under the Clayton Act. "Competition in terms of better quality is as important as price," Balto said, adding that the decision to take quality out of the equation when evaluating mergers is "mind-boggling."

 "It's what consumers care most about in some respects," he said. 

For more:
- here's the order (.pdf)

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