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Medical monopoly

The lawsuit filed November 12 by Saint Alphonsus Medical Center and Treasure Valley Hospital, a small nine-bed, physician-owned hospital, against Saint Luke’s Health System Ltd. promises to be a real scalpel fight.

What for years has been a simmering competition between two regional medical center systems has now erupted into a legal bloodletting that could well have long-term consequences for the medical profession throughout the state of Idaho. And, from a public interest standpoint, the case dangles tantalizing disclosure possibilities as both hospitals use the dispute to uncover the internal memoranda, antitrust analyses, and market posturing of their chief competitor.

The lawsuit arises out of a medical market environment which is described by St. Alphonsus as a wave of multiple St. Luke’s acquisitions in the last several years—20 physician practices, five hospitals, and four out patient surgery centers. St. Alphonsus claims that St. Luke’s has a dominant position in multiple healthcare markets. St. Luke’s is poised to acquire yet another medical group—Saltzer Medical Group—which would give St. Luke’s a “near monopoly” in Nampa for adult primary care services. St. Alphonsus claims this will cause irreparable harm to competition, particularly to St. Alphonsus Nampa hospital, which depends on admissions of patients from Saltzer physicians.

The prospective acquisition of Saltzer has been the subject of both the Federal Trade Commission and Idaho Attorney General investigations. Both federal antitrust law and Idaho State anti competition laws are implicated by the Saltzer deal, and the Idaho Attorney General’s Office has already requested that St. Luke’s “hold off on closing its purchase of Saltzer” pending Attorney General review of the acquisition. According to the complaint, St. Luke’s is “preparing to defy antitrust authorities” and to complete the transaction before either the Federal Trade Commission or the Idaho Attorney General can determine whether the acquisition is anti-competitive. To that end, the Attorney General’s Office has served formal civil investigative demands upon St. Luke’s but claims that it has received only “an incomplete . . . production” of the documents it needs to review.

As its primary request for relief, St. Alphonsus seeks a preliminary and permanent injunction prohibiting St. Luke’s from acquiring Saltzer. But that’s likely only the beginning of the legal struggle between the two medical systems. The federal court will eventually be required to enter findings either granting or denying preliminary and permanent injunctive relief to St. Alphonsus, and the parties will be entitled to prepare their cases by reviewing internal memoranda and documents of each other. They will be able to take the testimony of anyone they wish within the administrative offices of their competitor. There is no way to know how this initial complaint regarding Saltzer will mushroom, but it will likely expand into more claims relating to anti-competitive behavior by both of the two hospitals. St. Luke’s may have a counterclaim against St. Alphonsus for its own conduct in the marketplace.

St. Alphonsus couches its complaint as a quasi-public service lawsuit made necessary to preserve the medical “safety net” for the Nampa community. But in reality, the lawsuit is about money. St. Alphonsus claims to have invested “many millions of dollars” to improve its Nampa hospital. The loss of Saltzer to St. Luke’s and other market-dominating behavior imperil St. Alphonsus investments and its patient revenue. St. Alphonsus has been carefully watching St. Luke’s acquisitions, claiming that over the years it has engaged in a “unprecedented” series of acquisitions—hundreds of physicians, dozens of practices including surgical facilities, orthopedic practices, cardiology practices, and smaller hospital facilities in Ketchum, Twin Falls, Gooding, Jerome, Mountain Home and the like. As a result, St. Alphonsus claims that St. Luke’s has been able to charge higher prices and demand higher reimbursement rates from health plans. Specifically in Nampa, St. Luke’s has already lured physicians away from St. Alphonsus, and along with the physicians came their patients who are now alleged to be exclusively St. Luke’s admittees at the expense of St. Alphonsus.

St. Luke’s acquisition fever is harming a wide variety of medical markets, according to St. Alphonsus. As a result, health plans are forced to reach agreements with St. Luke’s at substantially higher rates, as there is no alternative to the provision of those services. And, patients are left without a hospital choice because St. Luke’s pattern of acquiring physicians or practices has locked St. Alphonsus out of the competition for those patient dollars.

St. Alphonsus and Treasure Valley Hospital have sued St. Luke’s under two important federal statutes, the Clayton Act and the Sherman Act, as well as under Idaho’s Competition Act Statute. The success of the case will depend upon St. Alphonsus’ ability to prove monopolization and anti competitive effect before the Saltzer acquisition could be prohibited by the federal judge. Success in such cases is not always assured, despite the fact that acquisitions and attempts at gaining greater market share have occurred. Similar lawsuits in the country have failed where courts have examined the complex financial data and determined that no antitrust injury can be proven. Courts do deny and have denied injunctions like the one sought by St. Alphonsus. Monopoly power alone is not enough. And the courts must balance the rights of medical providers to join for greater efficiency (or even to charge higher prices) against anti competitive effect. This means that in this case, the profits, price structure, acquisition strategies, marketing plans, and state and federal reimbursement documents of both hospitals will be subject to scrutiny as both sides attempt to prove that the large number of acquisitions of physicians, clinics, and facilities by St. Luke’s have or have not been anti competitive. The Idaho Attorney General has already demonstrated a keen interest in the outcome of this question and St. Alphonsus, it appears, finally had enough of seeing its largest competitor gobble up so much of the market at its expense.

 

 

About Steven B. Andersen

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