Judge orders St. Luke's to give up Saltzer Medical in antitrust case

A federal judge in Idaho made clear that providers consolidating in pursuit of realizing the goals of healthcare reform are still subject to conventional antitrust restrictions on market power.

In a closely watched case, U.S. District Judge B. Lynn Winmill ordered Boise, Idaho-based St. Luke's Health System to unwind its acquisition of Saltzer Medical Group.

The case marks the first time the federal courts have decided a Federal Trade Commission case against a physician practice deal, and it comes as healthcare systems across the U.S. are rapidly scooping up medical groups to create integrated delivery networks capable of managing population health.

St. Luke's said in a statement that it is “extremely disappointed by the ruling” and that it plans to appeal. “The court's decision calls into question whether accountable care can be an option for the people of Idaho, and specifically those who live in towns like Nampa and Caldwell,” Dr. David Pate, the system's president and CEO, wrote on his blog.

St. Luke's Boise-based competitors St. Alphonsus Health System and Treasure Valley Hospital filed suit in 2012 to block the deal, arguing that it would give St. Luke's too much power with payers.

Winmill agreed, concluding that the addition of Saltzer made St. Luke's the dominant player in the area, with 80% of the primary-care physicians in Nampa, a city about 20 miles west of Boise. That market dominance gives St. Luke's greater leverage with health plans and the power to charge higher hospital rates when physicians bill for ancillary services, like X-rays, Winmill wrote.

“It appears that the judge applied fairly traditional antitrust concepts,” said Dale Grimes, a Nashville-based antitrust attorney at Bass, Berry & Sims. St. Luke's argued—and the judge acknowledged—that the deal was intended to improve patient outcomes. But that wasn't strong enough to override concerns about price increases.

“I think what people in the industry had hoped was that under the imperatives of healthcare reform, those arguments would have greater strength than they've had in the past,” Grimes said.

Winmill opened his opinion by noting that the U.S. pays “substantially more” for healthcare than other developed countries but still lags on quality. He also acknowledged that providers are moving to a new model of care that rewards better patient outcomes.

“St. Luke's is to be applauded for its efforts to improve the delivery of healthcare in the Treasure Valley,” he wrote. “But there are other ways to achieve the same effect that do not run afoul of the antitrust laws and do not run such a risk of increased costs.”

The judge is expected to issue a detailed opinion that elaborates on the reasoning behind the order, which antitrust lawyer Matthew Cantor of Constantine Cannon described as “almost a policy opinion.”

The FTC has kept a close eye on the healthcare industry in recent years, and Chairwoman Edith Ramirez called the St. Luke's ruling “an important victory.”

“Keeping healthcare costs low and quality high by ensuring vigorous competition between providers is, and will continue to be, a top priority,” she said in a written statement.

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