Duke Scanlan & Hall, PLLC (Boise, ID)

Following a four-week federal antitrust trial, the largest hospital system in Idaho was ordered to unwind a transaction in which it had acquired the largest independent physician practice group in Idaho.  Over the past several years, St. Luke’s Health System of Boise, Idaho, had acquired more than 20 physician practices, five hospitals and four outpatient surgery centers.  St. Luke’s was the dominant provider in several markets.  In December 2012, St. Luke’s acquired the Saltzer Medical Group, the largest independent multispecialty physician group in Idaho.  Saltzer’s main office is located in the city of Nampa, Idaho, and sits across the street from a hospital operated by our client, Saint Alphonsus Health System.

Saint Alphonsus and physician-owned Treasure Valley Hospital filed a lawsuit as private plaintiffs seeking to prevent the St. Luke’s/Saltzer transaction on grounds that the acquisition violated state and federal antitrust laws.  The Federal Trade Commission and the Idaho Attorney General’s Office later filed a similar lawsuit and the two cases were consolidated.  The private and government plaintiffs claimed that St. Luke’s actions harmed competition, would increase health care prices, and would provide St. Luke’s with a dominant position in the Nampa market for adult primary care physician services.

St. Luke’s and Saltzer defended the acquisition primarily on efficiency grounds, claiming that the transaction was a critical element of St. Luke’s plan to create a clinically integrated health care delivery system.  The Defendants argued that the purpose of the transaction was to improve quality and implement a reimbursement system that would compensate medical providers based upon quality outcomes rather than volume of procedures performed.

U.S. District Judge B. Lynn Winmill concluded that, while St. Luke’s and Saltzer may have intended to improve patient outcomes, the transaction created too great a risk of increasing costs and therefore violated antitrust laws.  Judge Winmill’s ruling said it appeared “highly likely” that the acquisition would allow St. Luke’s to “negotiate higher reimbursement rates from health insurance plans that will be passed on to the consumer” and “raise rates for ancillary services (like x-rays) to the higher hospital-billing rates.”  The Court found that the acquisition violated § 7 of the Clayton Act and the Idaho Competition Act, and permanently enjoined the transaction.  St. Luke’s was ordered to fully divest itself of Saltzer’s physicians and assets and to take any further action needed to unwind the acquisition.

This matter is currently on appeal to the 9th Circuit.

The Saint Alphonsus plaintiffs were represented at trial by Keely Duke of Duke Scanlan & Hall (Boise, ID) and David Ettinger of Honigman Miller Schwartz & Cohn (Detroit, MI).