Potential patient referrals key to ruling against St. Luke's

As the result of a federal judge's decision that an Idaho health system violated antitrust laws when it purchased the state's largest independent physician practice, hospitals and systems interested in similar acquisitions will need to consider the ruling's potential effect on referrals both to their facilities and those adjacent.

U.S. District Judge B. Lynn Winmill released his findings of fact and conclusions of law that explain his decision in the case of St. Luke's Hospital System verses St. Alphonsus Health System, Treasure Valley Hospital in Boise, the Federal Trade Commission and the Idaho Attorney General.

Among his findings, the judge said that St. Luke's partnership with the Saltzer Medical Group in Nampa would have significant effect on referrals to hospitals and specialists in Canyon County. "Patients largely accept the recommendations of their primary care physicians as to what hospital, specialist and ancillary services they should use," he wrote.

Although he acknowledged that the partnership allowed Saltzer physicians to have complete discretion when referring patients, in practice, he said, discretion typically favors the hospital that employs the physicians. As an example, he pointed to St. Luke's purchase of Idaho Cardiothoracic and Vascular Associates. Prior to the purchase, the specialists sent 34 percent of their inpatient referrals to St. Alphonsus. But after the purchase, they didn't send any referrals to St. Alphonsus; all referrals went to St. Luke's.

A similar scenario occurred following St. Luke's purchase of Boise Orthopedic Clinic.

"After the acquisition, it is virtually certain that this trend will continue and Saltzer referrals to St. Luke's will increase," Winmill wrote.

He also determined that the Saltzer acquisition would result in higher prices for primary physician care and ancillary services, such as lab and diagnostic imaging. "St. Luke's own analysis projected that it could gain an extra $750,000 through hospital-based billing from Saltzer from commercial payers for lab work and $900,000 extra for diagnostic imaging," he wrote.

Last week, Christy Neuhoff, St. Luke's chief legal counsel, told FierceHealthcare that the system likely will appeal the decision to the Ninth Circuit. St. Luke's maintains that the acquisition of the 40-physician practice was essential to its goal to integrate care in the area and improve patient outcomes.

While Winmill acknowledged that the partnership would indeed improve care, he said the acquisition of a physician practice is not the only way to achieve integrated care.

To learn more:
- read Winmill's findings (.pdf)