Appeals court: St. Luke's Health System broke federal antitrust laws in acquisition deal



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BOISE, Idaho — The 9th U.S. Circuit Court of Appeals has upheld a lower court ruling that determined a Boise-area hospital violated federal antitrust laws when it purchased Idaho's largest independent physicians' practice.

In a 37-page decision released Tuesday, the appeals court upheld U.S. District Court Judge B. Lynn Winmill's ruling in January 2014 that found St. Luke's Health System's acquisition of Nampa-based Saltzer Medical Group violated antitrust laws and needed to be unwound.

The deal would raise health care costs by giving the hospital a dominant market position, Winmill said.

"This case is important because it ensures Idaho's laws will continue to protect and promote competition and a healthy, thriving marketplace, not just in southwestern Idaho but across the state," Idaho Attorney General Lawrence Wasden said in a statement.

Saint Alphonsus Regional Medical Center, Treasure Valley Hospital, the Federal Trade Commission and Wasden in 2012 filed a lawsuit seeking to halt the acquisition.

The judge's ruling is a significant one for the health care industry because of consolidation efforts being made around the nation, said Brett DeLange, chief of the consumer protection division in the Idaho attorney general's office.

"The court's opinion should provide clarity for others as they make their business judgments and decisions," DeLange said. "It's a very important decision not just for Idaho but for the nation as well."

Following Winmill's January 2014 ruling, St. Luke's appealed and the 9th U.S. Circuit Court of Appeals last summer ruled the acquisition could remain in place until the court reached a final decision, which it has now done.

"Of course we're very disappointed," St. Luke's spokeswoman Beth Toal said. "We've been working hard and focused on how collaborative relationships can help improve health care. Our focus is going to stay there, but how we approach that work will likely need to be different."

Winmill in his ruling rejecting the buyout summed up the case as it related to southwest Idaho: "The acquisition was intended by St. Luke's and Saltzer primarily to improve patient outcomes. The Court is convinced that it would have that effect if left intact, and St. Luke's is to be applauded for its efforts to improve the delivery of health care in the Treasure Valley. But 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. For all of these reasons, the acquisition must be unwound."

The appeals court considered that same problem of potential better patient results that, in the process, break the Clayton Antitrust Act, which in general is intended to prevent monopolies from forming.

"As the district court recognized, the job before us is not to determine the optimal future shape of the country's health care system, but instead to determine whether this particular merger violates the Clayton Act," the appeals court said. "In light of the careful factual findings by the able district judge, we affirm the judgment below."

Toal said the health care industry is evolving quickly, in many ways toward consolidations because of increased efficiencies. But in the process, she said, health care entities are bumping up against regulatory constraints.

"We're all looking at: How do we improve health care?" she said. "How do we fix what's broken in our national health care system?"

DeLange said the next step in the process is for St. Luke's Health System's acquisition to be undone. He said he couldn't give a timeline because he needed to review last summer's ruling temporarily keeping the acquisition in place.

As for antitrust laws potentially getting in the way of consolidations among health care providers attempting to improve patient care, he said there are solutions for that also.

"If they really think that, then they need to go to (lawmakers) and change the paradigm because the paradigm today is that competition works best," he said.

Toal said St. Luke's hasn't made a decision on its next move following the ruling by the appeals court. "We need some time to review that and determine what our next step is," she said.

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