On Feb. 12, the Ninth Circuit Court of Appeals affirmed a trial victory for the Federal Trade Commission (FTC) and Saint Alphonsus Medical Center (Saint Alphonsus) in their challenge to the acquisition by the St. Luke’s Health System (St. Luke’s) in Idaho of the 41-physician Saltzer Medical Group (Saltzer). The Ninth Circuit affirmed the trial court’s decision that the acquisition threatened competition in the market for adult primary care physician services in Nampa, Idaho, in violation of Section 7 of the Clayton Act, and further affirmed the trial court’s order divesting the combined entity. The case has been closely watched since its 2012 inception because it is the first time the FTC has litigated the acquisition of a physician practice through trial.
In 2012, Saint Alphonsus, a rival health system, sued St. Luke’s and Saltzer over the proposed acquisition. Shortly thereafter, St. Luke’s and Saltzer completed the transaction. Following a 19-day bench trial in federal court in Idaho, Judge B. Lynn Winmill expressly noted the “troubled state of the U.S. health care system,” and also “found that St. Luke’s and Saltzer genuinely intended to move toward a better health care system, and expressed belief that the merger would ‘improve patient outcomes if left intact’”—pro-competitive justifications offered by St. Luke’s and Saltzer in favor of the acquisition. Nonetheless, Judge Winmill found that the “huge market share” of the post-merger entity “creates a substantial risk of anticompetitive price increases” in the Nampa adult primary care physician market, thus violating Section 7 of the Clayton Act. Judge Winmill ordered divesture of the merged entity.
On appeal, the Ninth Circuit largely affirmed Judge Winmill’s findings. The following are the key points of the Ninth Circuit’s decision:
The St. Luke’s case is a significant victory for the FTC and may serve to embolden it and private plaintiffs to challenge other health system acquisitions of physician practices.
If you have any questions about the St. Luke’s case or antitrust issues implicated by health care transactions, please contact Jeremy Johnson at email@example.com or 612.632.3035.
Gray Plant Mooty is recognized as one of the leading corporate law firms in Minnesota and one of the top franchise firms in the world. Our roots go back to 1866. Today, we are a full-service firm with nearly 180 attorneys and offices in Minneapolis and St. Cloud, Minnesota; Washington, D.C.; and Fargo, North Dakota.