Judge: St. Luke's purchase of physician group violates antitrust law

A federal judge ruled Friday that St. Luke's Health System in Idaho violated antitrust laws when it purchased the state's largest independent physician's practice--a decision that may influence future hospital-physician buyouts across the country.

FierceHealthcare interviewed attorneys for both sides of the case, which pitted the not-for-profit health system against its main competitor, St. Alphonsus Health System, which is also based in Boise, as well as Treasure Valley Hospital in Boise, the Federal Trade Commission and the Idaho Attorney General.

The plantiffs argued that the acquisition gave St. Luke's an unfair and illegal marketplace advantage by dominating primary medical care in Canyon County. They also said it would drive up healthcare prices in the area. 

In the decision, U.S. District Judge B. Lynn Winmill acknowledged that St. Luke's intended to improve patient outcomes when it purchased the Nampa-based Saltzer Medical Group, a practice of 40 physicians, in December 2012. Furthermore, he said that if the partnership remained intact, St. Luke's would indeed improve healthcare delivery in the area.

"But there are other ways to achieve the same effect that do not run afoul of the antitrust laws and do not run such a risk of increased costs," he wrote. "For all of these reasons, the Acquisition must be unwound."

The ruling is a major blow for the health of Idaho, wrote David C. Pate, M.D., president and CEO of St. Luke's in his blog on Friday. Pate, who has written extensively about the lawsuit before and during the four-week trial that ended in November, said he was surprised and disappointed by the decision.

"The evidence presented by our attorneys told our story well and demonstrated that St. Luke's was, and is, pursuing innovation and putting the best thinking of providers and public policy experts to use and truly improve healthcare for the people of Idaho," Pate wrote.

But the evidence proved that the acquisition of a physician practice is not the only way to achieve integrated care, David A. Ettinger of Honigman Miller Schwartz and Cohn LLP, which represents St. Alphonsus, told FierceHealthcare in an exclusive interview this morning. 

For example, he said, St. Alphonsus offers integrated care through its own physicians as well as independent physicians.

The ruling--the first involving a hospital acquisition of a physician practice in a high market area under healthcare reform--has "very significant implications for hospitals and physician groups throughout the United States," Ettinger said.

The decision should serve as a warning to hospitals across the country that they must examine anti-trust issues before an acquisition. The purchase of a primary care group can sometimes raise antitrust concerns if it results in high market shares, even in a localized area, Ettinger said.

 "They must also realize that when they purchase a primary care group, patients are loyal to their physicians and expect to see their primary care physicians in a convenient location," he said.

Organizations seeking to provide high-quality, integrated care in their communities don't have to purchase a physician group to achieve it, according to Ettinger. There are other options, he said, such as co-management and integrated networks, and incentives like Meaningful Use.

St. Luke's will likely appeal the decision to the Ninth Circuit, Christy Neuhoff, St. Luke's chief legal counsel, told FierceHealthcare in an exclusive interview this morning. "We are extremely disappointed that the judge has ordered the parties to unwind the relationship and that the court defined the market so narrowly," she said.

Meanwhile, she said St. Luke's and the Satlzer group need to determine how they can work together and provide integrated, coordinated care in the future, even if it's not the formal partnership they originally envisioned. Furthermore, Neuhoff said they need to figure out how to unwind the partnership. The ruling does not include a timeframe or deadline. "It can't happen instantly," she said.

Brett DeLange, Idaho's deputy attorney general, said this morning that his office is pleased with the ruling, which validates the concerns it had regarding competition in the marketplace. In addition, he said the office will work with St. Luke's and Saltzer to carry out the steps needed to dissolve the acquisition.  

To learn more:
- read the ruling (.pdf)
- check out Pate's blog