Healthcare Business News

Idaho antitrust case puts healthcare pricing 'trade secrets' in spotlight

By Joe Carlson
Posted: December 17, 2013 - 12:30 pm ET

A nationally watched case in Idaho is casting light on a familiar irony in healthcare antitrust enforcement: Prices are officially considered proprietary trade secrets, even though it is the risk of rising prices that motivates the need for action.

If employers in Idaho had access to more information on the rates that insurers agreed to pay hospitals, healthcare premiums for consumers might fall. So argue media organizations suing for access to price information at the heart of a trial argued this fall in U.S. District Court in Boise. And they say some of the parties involved in the fight have admitted as much in court filings.

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The media groups have asked the 9th U.S. Circuit Court of Appeals in San Francisco (PDF) to unseal the pricing data as a matter of urgent public interest. That appeal is pending.

Last year the Federal Trade Commission teamed up with a local medical center in Nampa to sue Idaho's largest healthcare provider, Boise-based St. Luke's Health System, in an effort to undo St. Luke's purchase of the state's largest multispecialty doctor practice, Saltzer Medical Group, based in Nampa. The FTC says the purchase will give St. Luke's too much market power to drive up prices—and that St. Luke's has done so after previous acquisitions. St. Luke's, which has six hospitals and contract manages two others, says it's only trying to create the efficiently integrated healthcare delivery system envisioned by the Patient Protection and Affordable Care Act.

The 19-day bench trial in U.S. District Court in Boise concluded on Nov. 7. The district's chief judge, B. Lynn Winmill, has not yet declared a winner in the antitrust case.

To prove or refute the allegations that prices are likely to rise after the Saltzer acquisition, the FTC and the defense made extensive use of the negotiated prices that St. Luke's hospitals and doctors agreed to receive from commercial insurers before and after past mergers. Data about various healthcare providers' labor costs, budget projections and market strategies also came to light, court records say.

But the prices insurers pay to healthcare companies, and the corresponding premium rates that insurers offer to employers and beneficiaries, are all considered trade secrets (PDF)—an irony of timing in the view of the media organizations. Their brief to the 9th Circuit notes that the trial took place during the federal government shutdown, which was motivated by the ongoing struggle to control U.S. healthcare costs through the Affordable Care Act.

Advocates for the healthcare businesses say there's good reason to have the information hidden from public view.

“If you are the defendant in an antitrust case, and you are asked to turn over your business information, the concern is that if at the end of the day you didn't violate the antitrust laws, you don't want your proprietary information out in the public domain,” said Robert McCann, a healthcare antitrust attorney with Drinker Biddle & Reath in Chicago. “If you have competition, you want to protect your position.”

In all, 575 written exhibits, 38 witness depositions, and at least a third of the live testimony given in the trial were sealed from public view, according to the appeal filed by the Idaho Statesman newspaper, the Associated Press and the several other news organizations.

To make his case for a compelling public interest in unveiling the data, media attorney Charles Brown quoted from an affidavit filed by one of the many parties arguing against disclosure in the case: Linda Duer, executive director of the Idaho Physicians Network, which is the state's largest network of independent physicians.

“If a competing insurer were to find out about an IPN fee schedule or other reimbursement rates,” Duer said, “it would give them the ability to adjust their pricing/reimbursement, putting the competing insurance company at a competitive advantage to match or lower their reimbursement, creating the illusion of a better cost savings. …

“An example of this would be Blue Cross of Idaho telling an employer, 'By just changing networks alone we can save you over 1 million dollars over the course of a year, based on BCI's discounts versus IPN's discounts.' This would be extremely problematic.”

Brown saw the situation differently: “Ms. Duer reveals that openness as to pricing makes the market competition more open, vibrant, and honest, and IPN, Blue Cross and all others would simply have to compete in a transparent manner that would save 'over 1 million dollars over the course of a year,'” the appeal to the 9th Circuit says.

Officials with the FTC declined to comment, and calls for comment from IPN and St. Luke's were not returned.

Federal rules allow judges to conceal trade secrets in court cases, including “highly confidential” commercial information like pricing and price negotiations whose economic value depends on its secrecy.

Attorneys for the FTC may negotiate with the defendants to agree what information should be kept secret, as was the case when the agency sued to block the merger of health systems in northern Illinois, OSF Healthcare System and Rockford Health System. In that case, journalist and former FTC staff member Cecile Kohrs filed a motion (PDF) to unseal information in the case, but the issue was rendered moot after the hospitals abandoned the merger.

Follow Joe Carlson on Twitter: @MHJCarlson

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