FTC, Idaho AG challenge health system acquisition, calling it 'anti-competitive'

By Jessica M. Karmasek | Mar 13, 2013

BOISE, Idaho (Legal Newsline) -- The Federal Trade Commission and Idaho Attorney General Lawrence Wasden are suing to block a health system's acquisition of Idaho's largest independent, multi-specialty physician practice group.

According to the joint complaint filed Tuesday in a federal district court, the combination of St. Luke's Health System Ltd. and Saltzer Medical Group P.A. will give it "market power" to demand higher rates for health care services provided by primary care physicians, or PCPs, in Nampa, Idaho, and surrounding areas.

This will ultimately lead to higher costs for health care consumers, the FTC and Wasden argue.

"St. Luke's acquisition of Saltzer Medical Group has created a dominant single provider of adult primary care physician services in Nampa, with a nearly 60 percent share of the market," said Richard Feinstein, director of the FTC's Bureau of Competition.

"The result of the acquisition will be higher prices for the services that those physicians provide, with costs ultimately passed on to Nampa employers and their employees."

St. Luke's is a not-for-profit health system with headquarters in Boise. It owns and operates six hospitals.

Before being acquired by St. Luke's, Saltzer was a for-profit, physician-owned, multi-specialty group located in Nampa.

With about 44 physicians, Saltzer was the largest and oldest independent multi-specialty doctors' group in Idaho. Its specialties include family practice, internal medicine and pediatrics.

Effective Dec. 31, St. Luke's acquired all of Saltzer's personal property and equipment.

The deal transferred to St. Luke's the power to negotiate health plan contracts on Saltzer's behalf and to establish rates and charges for services provided by Saltzer physicians.

Saltzer, on behalf of its physicians, also has entered into a five-year professional services agreement with St. Luke's.

According to the joint complaint, St. Luke's acquisition of Saltzer was "anti-competitive" and violated Section 7 of the Clayton Act and Section 48-106 of the Idaho Competition Act.

The FTC and Wasden contend it created a "single dominant provider" of adult primary care physician services in Nampa, with the combined entity commanding nearly a 60 percent share of that market.

In addition, an alternative network of health care providers that does not include St. Luke's/Saltzer's primary care physicians becomes "far less attractive" for employers with employees living in Nampa, they argue.

The FTC and attorney general allege that the newly combined primary care practices will give St. Luke's greater bargaining leverage with health care plans, with higher prices for services eventually passed on to local employers and their employees.

So far, health plans serving Nampa have been able to resist some of St. Luke's demands for higher rates for health care services. The complaint states that they still have a credible outside option -- a network that includes physicians from Saltzer and St. Alphonsus, a health system that competes with St. Luke's.

However, the ability of health plans to put together an alternative network of adult PCP providers involving Saltzer and St. Alphonsus would be eliminated by St. Luke's acquisition of Saltzer, the FTC and Wasden argue in their complaint.

The complaint was filed under seal in the U.S. District Court for the District of Idaho.

According to the FTC, two of St. Luke's competitors, St. Alphonsus and Treasure Valley Hospital Limited Partnership, have already filed a private action in federal district court in Boise, also seeking to block the acquisition.

The court has scheduled the private plaintiffs' action for trial beginning July 29, after denying their request for a preliminary injunction.

The FTC and Wasden's joint complaint was filed in the same court, and the staff has been authorized to ask the district court to consolidate the two actions for discovery and trial.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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