January 20, 2014

FTC Successfully Blocks St. Luke’s Health System’s Physician Acquisition in Idaho

By Robert W. McCann, Kenneth M. Vorrasi and Jonathan H. Todt

Today, the Federal Trade Commission was victorious in its well-publicized challenge to St. Luke’s Health System’s acquisition of a large primary physician group – the Saltzer Medical Group – in Nampa, Idaho. This result is a reminder that, despite the acknowledged benefits of creating more efficient and higher quality health care, antitrust scrutiny will still apply to health systems’ integration efforts with physicians.

In March 2013, the FTC announced that it filed a complaint for an injunction against St. Luke’s, alleging that the Saltzer acquisition, which was not reportable to the federal antitrust agencies under the Hart-Scott-Rodino Antitrust Improvements Act, would create a single, dominant provider of primary care physician services in Nampa, Idaho. The FTC contended that the acquisition would provide St. Luke’s with greater bargaining leverage with commercial insurance health plans, because any attractive insurance plan would need to offer primary care services from St. Luke’s-Saltzer – resulting in higher prices for those services that ultimately would be passed on by the insurance plans to local employers and their employees.

In today’s opinion, Judge Lynn Winmill agreed with the FTC, concluding that the combined entity, which would include 80% of the primary care physicians in Nampa, would enable St. Luke’s to (1) negotiate higher reimbursement rates with commercial health care plans that would be passed on to consumers; and (2) raise rates for ancillary services, such as x-rays, to the higher hospital-billing rates. Accordingly, the court issued a permanent injunction against the acquisition and ordered St. Luke’s to divest itself of the physicians and assets acquired from the Saltzer group.

The Court did acknowledge that the acquisition was intended to improve patient outcomes and likely would have done so if the acquisition had been left intact. And it also applauded St. Luke’s for its integrated approach to the delivery of health care throughout the Treasure Valley of Idaho. But it concluded that these benefits did not immunize the acquisition from antitrust scrutiny and that the benefits could be achieved through less restrictive means than by acquisition.

The court issued a summary of its decision and analysis today. It said that it will be issuing its full analysis, including findings of facts and conclusions of law, after the parties have an opportunity raise any confidentiality objections 

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