Decision
Comment

Decision

In the first ever Federal Trade Commission (FTC)-litigated challenge to a hospital system's acquisition of a physician group, the US District Court for Idaho ruled in favour of the plaintiffs (ie, the FTC, the Idaho attorney general and St Alphonsus, a competing hospital system). The plaintiffs challenged St Luke's Health System's acquisition of the Saltzer Medical Group, a 41-physician multi-specialty group, including 16 adult primary care physicians, located in Nampa, Idaho. Among the key issues in the litigation were:

  • geographic market definition;
  • the likely impact on reimbursement rates; and
  • whether the acquisition would facilitate a more integrated healthcare delivery system that would improve healthcare quality and efficiency.

A more detailed findings of fact and conclusions of law were filed under seal to give the parties and third parties an opportunity to object to the disclosure of any material that they deem to be sensitive and confidential.

In the memorandum decision and order, the court recognised that St Luke's strategy to deliver more integrated care by using primary care physicians as care coordinators would lead to improved care in the Treasure Valley, but the court concluded that this more integrated care could be achieved through means other than acquisition of the Saltzer physicians.

Comment

This ruling is important for stakeholders in the healthcare industry, particularly hospitals, health systems and provider groups that are considering affiliations, mergers or consolidations with other provider groups, as well as health plans. Notably:

  • the acquisition was not reportable under the Hart-Scott-Rodino pre-merger notification process because the value of the transaction did not exceed the minimum threshold of $70.9 million;
  • the geographic market definition for the provision of adult person-centred planning services was hotly contested; and
  • both the plaintiffs and St Luke's presented expert testimony on the issue of whether employing physicians was necessary in order to achieve St Luke's strategy for integrated care.

For further information on this topic please contact Robert F Leibenluft or Leigh L Oliver at Hogan Lovells US LLP's Washington DC office by telephone (+1 202 637 5600), fax (+1 202 637 5910) or email (robert.leibenluft@hoganlovells.com or leigh.oliver@hoganlovells.com). The Hogan Lovells website can be accessed at www.hoganlovells.com.