St. Luke's loses appeal on physician acquisition case

The Ninth Circuit today upheld a District Court ruling that found St. Luke's Health System in Idaho violated antitrust laws when it purchased the state's largest independent physician's practice.

Judge Andrew D. Hurwitz wrote in the 32-page opinion that the Ninth Circuit agreed that the 2012 merger of St. Luke's and the Nampa-based Saltzer Medical Group, a practice of 40 physicians, violated the Clayton Act, which bars mergers that may substantially lessen competition or create a monopoly.

St. Luke's argued that the acquisition would improve patient outcomes and healthcare delivery in the area. But the Federal Trade Commission, the Idaho attorney general and the system's competitors--St. Alphonsus Health System and Treasure Valley Hospital--argued that the merger gave St. Luke's an unfair and illegal marketplace advantage by dominating primary medical care in Canyon County. They also claimed it would drive up healthcare prices in the area. 

Hurwitz wrote that it's not enough to the say the merger would allow St. Luke's to better serve patients. The hospital system would have to prove that the acquisition wouldn't hurt competition. "At most, the district court concluded that St. Luke's might provide better service to patients after the merger. That is a laudable goal, but the Clayton Act does not excuse mergers that lessen competition or create monopolies simply because the merged entity can improve its operations," he wrote.

David A. Ettinger of Honigman Miller Schwartz and Cohn LLP, which represents St. Alphonsus, told FierceHealthcare in an exclusive interview today that the ruling has broad implications for the hospitals and physician groups throughout the United States.

In essence, he said, "healthcare markets can be local. If one party has a high-market share, it can indicate serious antitrust problems when higher prices can be achieved. The mere claim that you are going to get the efficiencies as a result of a transaction doesn't trump these concerns."

Furthermore, Ettinger said, the benefits of an acquisition aren't merger-specific and can be achieved in other ways. The big lesson, he said, is that hospitals and health systems should not assume that their goal to improve quality will override antitrust concerns, he said.

Idaho Attorney General Lawrence Wasden said in a statement emailed to FierceHealthcare that the case "ensures Idaho's laws will continue to protect and promote competition and a healthy, thriving marketplace, not just in southwestern Idaho but across the state." In addition, he said, the AG's office will work with St. Luke's to help the system abide by the court's decision.

Representatives from the Federal Trade Commisison and St. Luke's did not return phone calls or emails from FierceHealthcare by deadline for comment. Therefore, it's unclear whether St. Luke's will appeal the decision to the Supreme Court.

To learn more:
- here's the Ninth Circuit ruling