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Judge details "highly likely" price increases after St. Luke's-Saltzer deal


By Rachel Landen
Posted: January 30, 2014 - 7:30 pm ET
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St. Luke's Health System in Boise, Idaho, planned to use the leverage created from its acquisition of Saltzer Medical Group to command higher payments that would fund physician pay increases, according to a new opinion issued by the judge who ordered the system to unwind the deal.

U.S. District Judge B. Lynn Winmill's opinion sheds light on the arguments that led him to side with St. Luke's competitors and state and federal officials who challenged the acquisition of Nampa, Idaho-based Saltzer. St. Alphonsus Health System and Treasure Valley Hospital, both in Boise, filed a lawsuit that was joined by the Federal Trade Commission and the Idaho attorney general.

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After ruling on the matter Jan. 24, Winmill gave the parties three days to raise objections to releasing material previously designated as confidential and presented in sealed proceedings during a 19-day bench trial that concluded Nov. 7.

St. Luke's and Blue Cross and Blue Shield of Idaho did raise objections. They requested, for example, that the judge omit specific figures and percentages regarding likely price increases.

Winmill declined, writing that the numbers might give competitors some insight but that the “effect is not great, especially when compared to the powerful insight those figures offer to the public trying to understand” the decision. He issued the opinion without any redactions.

The merged entity included 80% of the primary-care physicians in Nampa, which is about 20 miles west of Boise. Evidence and testimony presented at trial suggested that St. Luke's could use its strengthened market power to insist on health plans paying significantly higher hospital-based rates—more than 60% for office and outpatient visits and 30% to 35% for ancillary services, such as laboratory tests and diagnostic imaging.

The system planned to use that increased revenue to pay for a 30% salary increase for its newly acquired physician team, according to the opinion.

But those figures or approaches were never guaranteed, according to Ken Dey, spokesman for St. Luke's. Dey said those numbers were taken out of context and were the result of a consultant's factfinding mission to provide an overview of all the possibilities and potentials that could be associated with the acquisition.

“We don't think they should have played that large of a role,” Dey said. “A lot of that came from a draft proposal of what could be.”

In response to the decision last week, St. Luke's officials said they were “extremely disappointed” and planned to appeal. Dey said, as of Thursday, that they are still evaluating their decision concerning an appeal. But despite whatever conclusion is reached, St. Luke's plans to continue working with Saltzer in some capacity because of the value they see in its integration.

Winmill applauded St. Luke's efforts to improve the quality of patient outcomes through integrated medicine in the region. And though he suggested that the best result might be to allow for the acquisition and then monitor it to see if it actually does cause healthcare prices to rise, Winmill referenced the need to abide by the Clayton Antitrust Act of 1914.

“The Clayton Act is in full force, and it must be enforced,” Winmill wrote. “The act does not give the court discretion to set it aside to conduct a healthcare experiment.”

Follow Rachel Landen on Twitter: @MHrlanden


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