Lawyers for Idaho-based St. Luke's Health System argued in federal appeals court Wednesday that the system's acquisition of a medical group will lead to improved patient care, while attorneys for the plaintiffs in the case—which carries implications for health systems nationwide—said the deal will lead to less competition and higher prices.
The case turns on the question of whether St. Luke's 2012 acquisition of Saltzer Medical Group violates antitrust laws. A lower court ruled against St. Luke's, ordering it to unwind the acquisition. A stay of that divestiture order was granted in August while the appeal worked its way through the courts. Oral arguments on the appeal of the initial decision were heard in the U.S. Circuit Court of Appeals for the 9th District in Oregon.
Across the country, health systems are increasingly acquiring medical groups to create integrated delivery networks aimed at improving care and reducing costs.
St. Luke's has argued that the acquisition will help it improve care for the communities it serves. But the plaintiffs in the case—including the Federal Trade Commission, the Idaho attorney general and the system's Boise-based competitors, St. Alphonsus Health System and Treasure Valley Hospital—say the acquisition will diminish competition, giving St. Luke's too much power with payers and translating into higher prices for consumers.
Jack Bierig, a lawyer with Sidley Austin representing St. Luke's, argued Wednesday that the lower court should have given more weight in its decision to how the deal would benefit the communities St. Luke's serves.
In January, U.S. District Court Judge B. Lynn Winmill ruled that St. Luke's should give up Saltzer Medical Group, saying the acquisition would likely mean higher costs for consumers because the system's market dominance would give it greater bargaining leverage with health plans, as well as the power to charge higher hospital rates when physicians bill for ancillary services such as X-rays.
Bierig questioned the lower court's decision.
“Specifically, if left intact, the affiliation would improve patient outcomes, it would promote the movement toward integrated value-based healthcare that the court itself characterized as a consensus solution to the cost and quality concerns about healthcare delivery,” Bierig said. “We are not aware of a single case of a transaction that held that so many consumer benefits were held unlawful.”
Two of the judges, however, said they didn't agree that the district court judge hadn't thought about how the deal would help area patients.
“You can't tell us he didn't consider it,” Judge Andrew David Hurwitz said. “You can tell us he didn't weigh it heavily enough. You can tell us he should have reached a different conclusion. If you're seeking to get a reversal because you're trying to convince us the judge paid no attention to the evidence, I think you've got a really difficult case.”
Judge Richard R. Clifton added, “We're not buying that one.”
Lawyers opposing St. Luke have argued the court should uphold the lower court's ruling.
David A. Ettinger, an attorney with Honigman Miller Schwartz and Cohn for St. Alphonsus Medical Center, said acquiring Saltzer is not the only way to improve local healthcare and value. “The record is very clear I think, your honor, to show you can do these things without acquisitions,” Ettinger said.
Brett DeLange, chief of the consumer protection division in the Idaho attorney general's office, said in an interview after the hearing, “The judgment of the policymakers, the [Idaho] legislature, is that competition is the best way to allocate resources, the best way to guarantee lower prices, the best way to promote innovation and so has enacted a variety of laws to protect the marketplace and allow it to work.”
Many around the country are watching the case. Oral arguments concluded Wednesday, but it's unknown when the judges might issue their ruling, DeLange said.
In August, the attorneys general of 16 states filed a brief supporting the lower court's original decision against the St. Luke's deal. They wrote in their brief that that they had seen the growth of large healthcare systems in their own states through the acquisition of hospitals and physician groups, and also had seen higher prices for insurers and, in turn, consumers.
“We recognize that the integration of hospitals and physician groups can produce quality improvements through the implementation of integrated electronic patient care recordkeeping, the use of best practices in medical care, and most importantly, coordinated patient outreach,” the states wrote in the brief. “However, the benefits of integration can be achieved by means that preserve competition.”
St. Luke's, however, has argued that acquiring Saltzer will help it improve healthcare in its service area.
Dr. David Pate, president and CEO of St. Luke's, wrote on his blog after the hearing Wednesday, that the system believes it's important to continue to stand behind the deal. Pate has used his blog to comment on the case in the past as well.
“St. Luke's has always believed, and still believes, that it is doing the right thing for the communities we serve by partnering with physicians who share our vision and commitment to transforming health care, as the Saltzer physicians do,” Pate wrote.
Follow Lisa Schencker on Twitter: @lschencker
