After dodging an attempt by two of its competitors to stop the closing of its acquisition of Saltzer Medical Group (“Saltzer”)—a for-profit, physician-owned, multi-specialty group comprising approximately 44 physicians located in Nampa, Idaho—St. Luke’s Health System (“St. Luke’s”) must now also fend off the FTC’s and Idaho AG’s joint effort to unwind that transaction. On December 31, 2013, St. Luke’s closed on the Saltzer acquisition, but only after convincing a federal district court judge to allow the transaction to go forward pending a July, 2013 trial date (which was recently moved to September 16, 2013), and ignoring the FTC’s and Idaho AG’s repeated requests to delay the closing to allow each to complete its own investigation. The FTC and the Idaho AG have now sued, alleging that the transaction created a dominant local provider of adult primary care physician services with a market share of almost 60%. The case is a rare instance of an enforcement agency antitrust challenge to the acquisition of a physician practice group. Because most markets for physician practices are not concentrated—especially primary care practices—practice acquisitions rarely present antitrust issues. In a smaller market such as Nampa, however, the possibility exists that a single provider may gain market power by acquisition, especially when patients are not willing to travel very far to see a primary care physician. St. Luke’s is a not-for-profit health system based in Boise, Idaho that owns and operates six hospitals. For more than a year, the FTC and Idaho AG have been conducting a “wide-ranging investigation” of certain acquisitions made by St. Luke’s of physician practices and facilities in the Boise area and elsewhere, including the then-contemplated Saltzer acquisition. Yet despite the investigation and requests to delay the closing, St. Luke’s “provided notice to the FTC and [Idaho] AG of [its] intent to proceed to closing with the Saltzer Medical Group.” St. Luke’s “notice” led two of its competitors—Saint Alphonsus Health System and Treasure Valley Hospital—to bring an antitrust lawsuit seeking to stop the Saltzer acquisition. The FTC’s and Idaho AG’s sealed complaint is not yet available, so its objections to the transaction are discernible only from a press release. In addition to the horizontal effect of the deal—the elimination of competition between Saltzer and primary care physicians employed by St. Luke’s—the FTC’s and Idaho AG’s complaint may also allege a threat to competition from its vertical effects—St. Luke’s market power in primary care physician services may foreclose access of the area’s competing hospitals to physician referrals. That vertical theory is the principal basis for the suit filed by Saint Alphonsus and Treasure Valley—that St. Luke’s will be able to dry up their supply of physician referrals. St. Luke’s convinced the district court judge to allow it to move forward with the closing despite its competitors’ protests based on representations that: (1) the integration of St. Luke’s and Saltzer will proceed gradually with “no plans to close any of Saltzer’s clinics or facilities, to dispose or discontinue the use of any major equipment, or to alter Saltzer’s present service offerings”; (2) prior to trial, there will be no measurable change in Saltzer physician referral patterns; and (3) the relevant transactional agreement “‘provides a process . . . that gives Saltzer the right to repurchase tangible assets purchased by St. Luke’s and ensures that Saltzer has access to the personnel, facilities, medical records, and other resources that ii would need to provide uninterrupted care to patients’” and, thus, “allows Saltzer to return to operation as an independent physician group.” As a result of all of this, the court concluded that the acquisition could be unwound and divestiture ordered after closing if St. Luke’s loses at trial. Now nearly three months after St. Luke’s closed on the Saltzer acquisition, the FTC and Idaho AG have filed suit alleging that St. Luke’s acquisition of Saltzer is anticompetitive because it creates a single dominant provider of adult primary care physician services in Nampa, Idaho with a combined share of nearly 60%. The newly-combined primary care practices, the FTC and Idaho AG allege, give St. Luke’s greater bargaining leverage with health care plans, with higher prices for services eventually being passed on to local employers and their employees. What, if anything, it will mean for St. Luke’s if after trial (and appeal, if any) it is ordered to unwind its acquisition of Saltzer is far from clear. A lot will depend on how far along the integration path St. Luke’s has traveled. What is clear, however, is that St. Luke’s ability to fend off its competitors’ initial efforts to stop the transaction from closing and the FTC’s inability to delay the transaction pending its investigation, has allowed it to move forward. What, if any, advantage this ultimately provides St. Luke’s from a litigation perspective and operational standpoint is yet to be seen. All of this highlights the various paths that a non-reportable transaction (even one already under investigation) can take, and should serve as a reminder that the Hart-Scott-Rodino (“HSR”) Act only applies to certain transaction and is designed to (1) preserve the agencies’ ability to investigate competitive consequences of a transaction before closing, (2) provide an opportunity to obtain an effective remedy, and (3) reduce the likelihood that competition will be reduced during the HSR waiting period. With more than 20 full-time antitrust lawyers in our Washington, D.C. office alone (more than 40 firm wide), we have the depth and experience to handle the most challenging transactions. If you have any questions regarding this matter, or would like to learn more about our antitrust capabilities, please contact Jonathan L. Lewis, firstname.lastname@example.org or 202.861.1557, or Lee H. Simowitz, email@example.com or 202.861.1608.