St. Luke's antitrust lawsuit opens in court

Credit: Zella Strickland

A sketch of Monday's proceedings, courtesy Zella Strickland / courtroom artist

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by Jamie Grey

Bio | Email | Follow: @KTVBJamieGrey

KTVB.COM

Posted on September 23, 2013 at 6:27 PM

Updated Tuesday, Sep 24 at 6:52 AM

BOISE -- An antitrust lawsuit involving the two largest health care providers in the Treasure Valley is now in court, with a judge to rule on what could be a significant case for how health care systems are allowed to grow in medium-sized markets.

Saint Alphonsus Health System, along with Treasure Valley Hospital and the Federal Trade Commission and Idaho Attorney General's Office are suing St. Luke's Health System.

They argue St. Luke's is illegally creating a monopoly on health care in Nampa by acquiring doctor-owned Saltzer Medical Group.

What does this deal mean for patients? FTC says perhaps higher prices

Cost of healthcare, cost of insurance co pays, innovation in care options, and how doctors are employed are all at stake here, according to all parties involved here. Whether the Saltzer-St. Luke's deal is positive or negative for those things, and if it's legal, is at the heart of this case.

"Essentially what St. Luke's is telling the people of Nampa is: It's either St. Luke's or the highway. Those are their two choices. There will be no major alternative competitors in that market if this deal goes through," Tom Greene, Special Counsel to the FTC, told KTVB.

In court, the FTC said post-merger, St. Luke's market share in Nampa would be roughly 80%. Greene says with that concentration, they expect prices could rise for patients.

"In the context of what would happen to an individual consumer, they may initially see higher co pays or deductibles because prices have gone up," Greene said. "Over time, their employers would begin to see the costs in the employer-based plan increasing and the co pays also increasing. Longer term for Idaho businesses and corporations, health care is typically the second largest single cost a business pays, so if health care costs go up, their competitiveness goes down as they try to sell into other markets where it's cheaper."

But - St. Luke's says the deal helps lower prices with innovative care

St. Luke's argues that 80% figure may be inaccurate; the calculation of market shares is based on office visits and St. Luke's attorney believes the number is reflective of "preference" and not a realistic calculation.

Further, Saint Luke's says people in Nampa don't just shop the Nampa healthcare options, so it's not just one market and shouldn't be considered that way in deciding if a monopoly exists.

"I  think if you live in the Treasure Valley, you know people that live in Canyon County, including Nampa, and work in Boise or Meridian or elsewhere,"  said Christine Neuhoff, St. Luke's Health System VP General Counsel. "We know that people travel for healthcare as well as work. People seek primary care close to the places where they work as well as closer to their homes, and we just don't believe that Nampa alone is a market."

Neuhoff says because of the lawsuit, the full benefits of the acquisition can't be known or measured now, but says eventually the deal will prove to improve health care in Nampa and improve delivery of health care.

Strategies with Saltzer: The view from both sides

Plaintiffs: The deal gives too much power to St. Luke's

The plaintiffs say the Saltzer acquisition allows St. Luke's to essentially to stack the deck to increase profit and reduce innovation, with things like putting referrals to their system in their pocket by picking up more providers and creating an environment where specialists fearing losing referrals.

"Their shares are enormous, so that part of the calculus I think is going to be pretty straightforward. Their argument will be that they're going to improve quality dramatically," Greene said. "What we're saying based on observations in other parts of the United States is that everything they want to do can be done without buying doctors, buying up practice groups and essentially creating exclusive arrangements whereby other competitors can't take advantage of the doctors they've decided to employ."

In court, Treasure Valley Hospital's attorney laid out several concerns with strategies he says St. Luke's is using or could use with Saltzer including: Power of referrals by steering primary care providers, power of employed specialists to direct patient surgeries to happen at a St. Luke's facility and some specialists, like surgeons, fearing they'll lose employed primary care provider referrals.

Defense: The deal is critical to moving innovative integrated care forward

Saint Luke's on the other hand says patients benefit when doctors come together, that there's more creativity for patient benefit.

"What we've found is when you work with physicians who are both financially and personally aligned with each other and with the system of care that they look at the way they provide care through an entirely different lens, and they're able to determine the best ways to actually improve processes that do provide care in a lower cost setting and a lower cost way," Neuhoff said.

They say the Saltzer acquisition is a key part of their plan to advance toward what they call a "value-based model of delivering care", rather than "fee-based", so that doctors have more freedom when prescribing tests and treatments. St. Luke's says undoing the deal would greatly change their new plan they hope to roll out by the beginning of 2015.

"From St. Luke's perspective, it would certainly slow down our ability to transition to the integrated, value-based delivery system that we are transitioning to. From the Saltzer perspective, it would really have a dramatic impact on their ability to provide high quality, easily accessible care in Canyon County," Neuhoff said.

In court, another St. Luke's attorney further said undoing the deal would likely cripple Saltzer financially and perhaps force those health care providers to seek employment elsewhere. An attorney for Saltzer said undoing the deal would cause "great harm", possibly to the consumers, quality of health care and doctors who've chosen to go to integrated health care with St. Luke's.

How the month-long trial will work

Ultimately, the federal judge will decide if the deal stands or if it must be unwound, as all plaintiffs are asking for.

"What we're asking for is the court to undo the deal. It's called divestiture, but it's just unwinding of the transaction," said Brett DeLange, Idaho Deputy Attorney General.

Some of the court proceedings, including Saint Alphonsus's opening statement, have been or will be closed to the public because they deal with issues that could compromise competition. Those include issues like prices, rates and healthcare negotiations.  This trial is expected to take four weeks.

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