Bloomberg News

Hospital Antitrust Case Won by U.S. Over Doctor-Group Merger (1)

January 24, 2014

Idaho’s largest hospital chain and physician group must unwind their merger, a federal judge ruled, siding with U.S. regulators seeking to broaden antitrust enforcement in health-care acquisitions.

The combination of St. Luke’s Health System Ltd. and the Saltzer Medical Group would raise prices for consumers even though it would improve patient care, U.S. District Judge B. Lynn Winmill in Boise, Idaho said today, ruling in a pair of cases brought by the Federal Trade Commission and local hospitals.

“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,” Winmill wrote in ordering the combination undone.

While the FTC has been active in taking on hospital deals it sees as anticompetitive, the Idaho case, won after a trial, underscores the agency’s new turn to block doctor-group acquisitions by hospitals. The FTC in 2012 settled a similar complaint brought over the acquisition of two cardiology groups in Nevada.

The ruling will embolden the commission in its efforts with physician groups and provides a precedent for taking on other mergers, Jeffrey Jacobovitz, an antitrust lawyer at Arnall Golden Gregory LLP in Washington, said in a phone interview.

‘Unique Case’

“It’s a unique case, it’s an expansion of what they’ve been doing in the health care arena and they won,” said Jacobovitz, a former FTC lawyer. “It’s major a victory by the FTC.”

Jacobovitz said he expects the agency will challenge future mergers of this kind and possibly retroactively scrutinize consummated deals where hospitals acquired physician practices.

David Balto, an antitrust lawyer in Washington who has represented consumer groups, said the ruling could be read as conflicting with the Obama administration’s health care overhaul, which advocates reducing fragmentation of medical care to improve quality.

“This is going to raise really difficult questions about the kind of integration that’s envisioned by the Affordable Care Act,” he said.

Alternate Means

Winmill didn’t specify alternate means of improving patient outcomes and released only a summary of his ruling pending redaction of proprietary information in the full opinion.

“St. Luke’s is extremely disappointed by the ruling” and anticipates appealing, Ken Dey, a spokesman for the hospital chain, said.

The merger occurred in January 2013, Dey said.

Edith Ramirez, chairwoman of the Federal Trade Commission, which joined the Idaho Attorney General in suing to block the merger, hailed Winmill’s ruling.

“The combination of St. Luke’s and Saltzer would have given the merged hospital system the market power to demand higher rates for health care services,” she said in an e-mailed statement that

The case is Saint Alphonsus Medical Center v. St. Luke’s Health System, 12-cv-560, U.S. District Court, District of Idaho (Boise).

To contact the reporters on this story: Andrew Zajac in Washington at azajac@bloomberg.net; David McLaughlin in Washington at dmclaughlin9@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Sara Forden at sforden@bloomberg.net


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