Hospitals have been gobbling up physician practices at a rapid clip in recent years, raising concern among antitrust regulators that some of the acquisitions will lead to monopolistic practices such as price gouging. Yet the government still hasn't brought a single case to trial, which would provide clearer guidelines for other health systems.
That could change later this year if Idaho's St. Luke's Health System follows through on its promise to fight the antitrust suit filed last week by the Federal Trade Commission and the Idaho attorney general. The suit, still under seal, challenges St. Luke's acquisition of the state's largest independent doctor practice, Saltzer Medical Group. The acquisition had already been opposed in civil court by the system's main rival, Trinity Health's St. Alphonsus division, based in Boise
“Until now, you have largely heard from St. Alphonsus and the FTC,” St. Luke President and CEO Dr. David Pate said on his blog, “Dr. Pate's Prescription for Change.” “In court, we will have the opportunity to present our evidence and our story.”
Federal and state antitrust regulators say Boise-based St. Luke's acquired an illegal 60% monopoly over primary-care services in the state's Nampa market by acquiring the Saltzer group. The deal closed Dec. 31. Earlier this year, St. Luke's received permission from the CMS to form a Medicare accountable care organization, an entity that is intended to link physicians, health systems and patients in ways that decrease expensive hospitalizations and drive down the overall cost of healthcare.
Pate accused government regulators of failing to understand accountable care or hospital-physician relationships. He also revealed on his blog, which appears on the hospital's website, that talks to settle the complaint recently broke down. “We submitted assurance to the FTC and AG that St. Luke's would not and could not use Saltzer as leverage to increase prices,” Pate wrote. “Unfortunately, the FTC would consider nothing less than divestiture.”
Experts say ACOs do not require common ownership of all the entities involved. FTC officials have said repeatedly in interviews that they believe the goals of collaboration to promote efficiency and competition to keep prices low are not incompatible
Bruce Sokler, an antitrust attorney with Mintz Levin in Washington, said the suit against St. Luke's acquisition showed that the FTC remains serious about policing hospital-physician deals. He noted that the FTC intervened in deals in Reno, Nev., and Reading, Pa., in the past year, though those matters were resolved without trials.
“There will continue to be—particularly as the Affordable Care Act is being implemented, which probably triggers more consolidation—antitrust scrutiny and review,” Sokler said. “And I think that providers have to assume that they may be under that microscope here, and they can't exclude antitrust analysis in doing these deals.”
It remains to be seen how much officials at provider organizations can learn from the case because the FTC and attorney general filed their complaint under seal. U.S. District Court records in Boise show the case against St. Luke's was filed March 12, but public access to the complaint is blocked.
Douglas Ross, a healthcare antitrust attorney with Davis Wright Tremaine in Seattle, said the decision to file the lawsuit under seal was contrary to what was happening in federal courts generally, where judges are becoming more reticent to grant secrecy even when both sides in a case want it. “It is important for the Federal Trade Commission to convey to the public what its theories are and why it is taking actions, and complaints should be public,” Ross said.
Other recent FTC actions in healthcare antitrust cases have blocked out “potentially sensitive business information” provided during investigations, including the identities of payers, market forces and prices.
Government antitrust officials also requested permission to join a private antitrust lawsuit that was filed against St. Luke's last November by the health system's main competitor, St. Alphonsus, and a group of former Saltzer physicians. That suit was put on an expedited trial schedule with opening arguments slated for July 29.
David Ettinger, an antitrust attorney for St. Alphonsus, said the system welcomed the FTC and attorney general's decisions to join the lawsuit. “I think we had a strong case before, and we still have a strong case, and I'm glad that the Federal Trade Commission and the Idaho attorney general apparently agree with that,” he said.