Healthcare News & Insights

Hospital merger lawsuit could set national precedent

Hospital mergers have been on the rise for a while now — and they’re catching the eye of the Federal Trade Commission (FTC) for possible antitrust law violations. Right now, one specific merger has the FTC’s and the nation’s full attention. 

101410487That merger is the one between Idaho’s St. Luke’s Health System, Ltd., and Saltzer Medical Group, P.A., which became effective Dec. 31, 2012.

According to an FTC release, the deal transferred to St. Luke’s the power to negotiate health plan contracts on Saltzer’s behalf and to establish rates and charges for services provided by Saltzer physicians. And, on behalf of its physicians, Saltzer entered into a five-year professional services agreement with St. Luke’s.

Why all the fuss?

So why is this acquisition drawing so much attention?

St. Luke’s is a not-for-profit health system with headquarters in Boise, ID, that owns and operates six hospitals and is the state’s largest private employer.

Saltzer Medical Group P.A. is Idaho’s largest independent, multi-specialty physician practice group.

Add those two Idaho power houses together and the spectra of antitrust violations automatically arises.

“St. Luke’s acquisition of Saltzer Medical Group has created a dominant single provider of adult primary care physician services in Nampa, with a nearly 60% share of the market,” Richard Feinstein, director of the FTC’s Bureau of Competition, said in the release. “The result of the acquisition will be higher prices for the services that those physicians provide, with costs ultimately passed on to Nampa employers and their employees.”

And the FTC isn’t alone. The Idaho Attorney General’s (AG) Office  joined forces with the FTC in the lawsuit.

The flip side

Obviously, St. Luke’s disagrees with the FTC and the Idaho Attorney General’s office.

The health system believes the acquisition will promote competition, not stifle it. It pointed to the fragmentation of the healthcare delivery system that increases inefficiency as the cause that drives up costs.

In an Idaho Press-Tribune story, the company went on to say that the integrated delivery of services will cut costs in the long run, because consumers will have more choices with less hassle.

Setting a precedent

Despite being under federal investigation, St. Luke’s moved forward with the acquisition. It also faced a lawsuit from two of its competitors (Saint Alphonsus Health System and Treasure Valley Hospital, both in Boise), which was to take place in July, but after the FTC and Idaho AG joined the lawsuit, the trial date was moved to September.

Starting next week, U.S. District Judge Lynn Winmill will give each side two weeks to argue their cases. So we won’t have to wait months and months for a verdict.

Reason for the fast track: Obama healthcare exchanges open Oct. 1, and this is a high-profile case that could set a national precedent.

Who will come out on top?

It’s anyone’s guess.

Idaho Attorney General Lawrence Wasden has an excellent reputation for his job performance and has the backing of the FTC. But both entities know that challenging a completed merger is difficult.

We’ll keep you posted on the outcome.

 

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