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St. Luke's Nampa Medical Plaza houses an outpost of Saltzer Medical Group.
St. Luke's Nampa Medical Plaza houses an outpost of Saltzer Medical Group.

States side with FTC against St. Luke's physician deal


By Beth Kutscher
Posted: August 22, 2014 - 1:30 pm ET
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The attorneys general from 16 states have filed an amicus brief backing the Federal Trade Commission in its closely watched bid to undo an Idaho health system's acquisition of a physician practice.

A U.S. district judge in Boise this year ordered St. Luke's Health System to divest Saltzer Medical Group. As providers across the country buy up physician practices to meet the goals of population health management, St. Luke's had tried to argue that the deal is necessary for it to meet the imperatives of healthcare reform.

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Yet in the first federal case to tackle the issue, Judge B. Lynn Winmill applied a traditional analysis of market power. The addition of Saltzer gave St. Luke's control of 80% of the primary-care physicians in Nampa, Idaho, he wrote, siding with St. Luke's competitors St. Alphonsus Health System and Treasure Valley Hospital, which had sued in 2012 to block the deal.

The FTC and the Idaho attorney general joined the suit in 2013. The case is now in front of the Ninth U.S. Circuit Court of Appeals.

In their amicus brief, the AGs urged the appeals court to uphold the lower court's ruling. They argued that they have witnessed in their own states (PDF) that provider consolidation has increased prices for insurers, which are passing along the costs to consumers through higher premiums, copayments and deductibles.

Moreover, they echoed Winmill's conclusion that the goals of integration—such as better care coordination—can be achieved through other means that aren't anticompetitive. “The ACA relies on competition to control costs,” they wrote.

The states represented in the brief are California, Washington, Pennsylvania, Connecticut, Delaware, Illinois, Iowa, Kentucky, Maine, Maryland, Mississippi, Montana, Nevada, New Mexico, Oregon and Tennessee.

America's Health Insurance Plans and the Association of Independent Doctors also have filed amicus briefs supporting the FTC.

But other groups have urged the appeals court to consider the pro-competitive benefits of integration. America's Essential Hospitals, which represents safety net hospitals, filed its own amicus brief to urge the reversal of the district court ruling. Not all hospitals are pursuing a consolidation strategy to gain greater leverage with payers, the group argued. Rather, such partnerships actually encourage doctors to treat underserved communities (PDF) by aligning their financial incentives with hospitals that are getting paid to keep patients healthy.

“The lower court's decision, if upheld, will have a chilling effect, deterring essential safety net hospitals from pursuing tight integration as a strategy to improve access to high-quality, coordinated care for vulnerable patients,” it wrote.

The International Center for Law & Economics and Medicaid Defense Fund also have filed briefs in support (PDF) of St. Luke's.

Earlier this summer, the health system was issued a stay on Winmill's order, allowing it to hold on to Saltzer while the appeal is decided.

Follow Beth Kutscher on Twitter: @MHbkutscher


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