Two weeks into the FTC’s and Idaho AG’s antitrust trial challenging hospital system St. Luke’s Health System (“St. Luke’s”) acquisition of the Saltzer Medical Group (“Saltzer”) – a for-profit, physician-owned, multi-specialty group comprising approximately 44 physicians located in Nampa, Idaho – a lot more is at stake than just whether St. Luke’s eventually will be ordered to unwind its acquisition of Saltzer.

As reported previously, the FTC and Idaho AG allege 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.  Other local hospitals contend that the combination may choke their access to inpatient admissions referred by Saltzer physicians.

What is at stake besides whether St. Luke’s gets to keep Saltzer?  According to recent comments by FTC Commissioner Joshua Wright, it will be whether the FTC launches a provider healthcare merger retrospective review – for the second time.  In Commissioner Wright’s view, as reported, a loss in Idaho might well cause the FTC to turn its focus to completed hospital-physician deals to build needed experience to win such challenges.

Commissioner Wright’s comments echo those made earlier this summer by FTC Chairwoman Edith Ramirez.  While speaking at a symposium on retrospective analysis of agency determinations in merger transactions, she emphasized what the FTC learned from its first hospital merger retrospective, namely, that the FTC needed to “revamp” its approach to litigating horizontal hospital merger challenges.  The FTC’s revamped approach now “emphasizes how a merger can leave an insurer – the direct payor for hospital services – with few alternatives to include in its network, increase the bargaining leverage of the combined hospital, and lead to higher prices.”  The result from this new approach, beginning with the Evanston case in 2007, according to Chairwoman Ramirez, has been “a winning streak that now includes three successfully-litigated merger challenges and a growing list of hospital deals abandoned after the FTC threatened a challenge.”

Since healthcare “remains a top agency priority,” Chairwoman Ramirez’s statements along with Commissioner Wright’s recent words suggest that a renewed provider healthcare merger retrospective is on the horizon.  But where would such a retrospective focus?

Chairwoman Ramirez sees much to be gained by examining more closely the effects of combinations that have “a significant vertical element.”  An area of examination would include the impact of integration among physician in different specialties that results from hospital acquisitions of physician practices, she said.  Another, where she said the FTC hears “growing concerns,” involves “provider consolidation in non-overlapping product or geographic markets,” which may lead to higher prices.  These combinations might include, for example, “center city hospitals acquiring smaller hospitals in outlying areas or a general acute care hospital acquiring a children’s hospital.”  According to Chairwoman Ramirez, “preliminary economic evidence suggests that harm from this type of integration, ordinarily not what we would challenge, could be real and substantial.”

Drawing on the experience of members of our healthcare team in complementary areas of health law, including transactions, tax, labor and employment, and healthcare regulation, our team of antitrust lawyers have the depth and experience to handle the most significant antitrust healthcare matters, including transactions and investigations.  If you have any questions regarding this matter, or would like to learn more about our healthcare antitrust capabilities, please contact Jonathan L. Lewis, jllewis@bakerlaw.com or 202.861.1557, or Lee H. Simowitz, lsimowitz@bakerlaw.com or 202.861.1608