The Unhappy Intersection of Hospital Mergers and Antitrust Laws
Thursday, March 5, 2015

The rapidly-evolving field of health care has been moving lately towards a single-minded goal – coordination of patient care in the name of efficiency and efficacy. Hospital systems are more and more often merging with other medical practices to better achieve the standards and goals of the Patient Protection and Affordable Care Act (“ACA”). The Ninth Circuit Court of Appeals, however, recently provided a stark reminder that the ACA isn’t the only law hospitals need to consider compliance with in these mergers.

Saltzer Medical Group in Nampa, Idaho, had been seeking to make a change from fee-for-service to risk-based reimbursement and approached St. Luke’s Health System in Boise in 2012about a formal partnership. They entered into a five-year professional service agreement that contained language about wanting to move away from fee-for-service reimbursement but without any clear language on making that change. Saltzer received a $9 million payment on the deal. Other hospital systems in the area, the FTC, and the Idaho Attorney General all filed suit to enjoin the merger.

The Ninth Circuit affirmed the district court’s holding that St. Luke’s violated state and federal antitrust laws when acquiring Saltzer. St. Luke’s argued that acquisition of the other provider would improve patient outcomes and care in the community of Nampa, Idaho, where Saltzer operates, but both courts agreed that the anticompetitive concerns surrounding the merger outweighed the benefits to quality care.

This case and other similar cases brought by the FTC provide a bleak outlook for health care providers looking to merge with other entities to provide care and efficiency under the aims of the ACA. While the court ultimately found that St. Luke’s aims were beneficial and not anticompetitive in and of themselves, antitrust laws only truly take the effect on competition into account, and courts are not ready to place quality of care under the ACA on equal footing.


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