First Hospital-Practice Antitrust Ruling Sets Interesting Precedent

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ATL-thumb1As more and more hospitals are buying up physician practices, an antitrust lawsuit was inevitable, and last week, the first one of its kind received a stern and concise ruling from a higher court.

According to Ilen MacDonald at FierceHealthcare, “A federal judge ruled Friday that St. Luke’s Health System in Idaho violated antitrust laws when it purchased the state’s largest independent physician’s practice–a decision that may influence future hospital-physician buyouts across the country.”

St. Alphonsus Health (St. Luke’s main competitor), Treasure Valley Hospital, the Federal Trade Commission, and the Idaho Attorney General had all challenged the buyout, arguing “that the acquisition gave St. Luke’s an unfair and illegal marketplace advantage by dominating primary medical care in Canyon County. They also said it would drive up healthcare prices in the area.”

U.S. District Judge B. Lynn Winmill gave St. Luke’s the benefit of the doubt, saying its purchase of 40-physician Saltzer Medical Group was designed to improve both patient outcomes and healthcare delivery.

However, he wrote in his  decision, “…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.”

Dr. David C. Pate, St. Luke’s president and CEO, took to his blog to argue against the ruling: “The evidence presented by our attorneys told our story well and demonstrated that St. Luke’s was, and is, pursuing innovation and putting the best thinking of providers and public-policy experts to use and truly improve healthcare for the people of Idaho.”

St. Alphonsus, however, contends “that the evidence proved that the acquisition of a physician practice is not the only way to achieve integrated care,” according to the lawyer representing the organization, David A. Ettinger of Honigman Miller Schwartz and Cohn LLP.

He added, “The decision should serve as a warning to hospitals across the country that they must examine anti-trust issues before an acquisition. The purchase of a primary-care group can sometimes raise antitrust concerns if it results in high market shares, even in a localized area.”

Furthermore, Ettinger continued, “They must also realize that when they purchase a primary-care group, patients are loyal to their physicians and expect to see their primary-care physicians in a convenient location.”

Instead of buyouts, he advocates for co-management and integrated networks.

St. Luke’s will appeal the decision with the Ninth Circuit, its chief legal counsel, Christy Neuhoff, said, while nailing down the specifics for unwinding the partnership.

As healthcare executives, you probably knew this type of an antitrust case was inevitable. Do you agree with the district court’s ruling? Do you foresee similar cases popping up in your area? How will this govern your approach to potential practice buyouts?

-by Pete Fernbaugh

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