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St. Luke's loses appeal; Acquisition created monopoly, judge rules

The 2012 deal to buy Saltzer Medical Group hurt competition, created unfair bargaining clout for the healthcare system, court rules.

Susan Morse, Senior Editor

St. Luke’s Health SystemSt. Luke’s Health System

St. Luke’s Health System in Boise, Idaho violated antitrust laws when it bought a large physician practice in 2012, according to an appeals court ruling Tuesday.

The U.S. Ninth Circuit Court of Appeals upheld a lower district court’s judgment ordering St. Luke’s to divest ownership of Saltzer Medical Group, located in Nampa, Idaho, according to court documents.

While the merger could have led to improved patient care in the market, the deal would have created a monopoly, Judge Andrew Hurwitz wrote in the court opinion.

The appeals court upheld the district court’s opinion that St. Luke’s could use its post-merger power to negotiate higher reimbursement rates from insurers for primary care physician services, according to court documents.

The district court also found the acquisition limited the ability of insurers to negotiate with the merged St. Luke’s and Saltzer.

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According to internal e-mails used as evidence in the case, the companies planned to leverage the increased bargaining power to raise prices, according to court documents.

An e-mail between St. Luke’s executives discussed “pressur[ing] payors for new directed agreements,” and an exchange between Saltzer executives stated that “[i]f our negotiations w/ Luke’s go to fruition,” then “the clout of the entire network” could be used to negotiate favorable terms with insurers, according to court documents.

The district court did not find that Saltzer physicians would inappropriately label in-house services as hospital-based, or that they would force patients to travel to the St. Luke’s hospital in Boise for services that could be provided in-house in Nampa, according to the court record.

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St. Luke’s argued that the merger would allow the health system to move toward integrated care and risk-based reimbursement.

The lawsuit against the merger was brought in November 2012 by Saint Alphonsus in Nampa, which is part of the multistate Trinity Health system; and Treasure Valley Hospital Limited Partnership.

The Federal Trade Commission and State of Idaho took up the case in March 2013.

In 2012, St. Luke’s acquired Saltzer’s assets and entered into a five-year professional service agreement with the large practice group of Saltzer physicians. Saltzer received a $9 million payment for goodwill, according to court documents.

Twitter: @SusanMorseHFN

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