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Saint Alphonsus Medical Center -Nampa, Inc v. St. Luke's Health System

December 20, 2012

SAINT ALPHONSUS MEDICAL CENTER -NAMPA, INC., TREASURE VALLEY HOSPITAL LIMITED PARTNERSHIP,
SAINT ALPHONSUS HEALTH SYSTEM, INC., AND SAINT ALPHONSUS REGIONAL MEDICAL CENTER, INC.
PLAINTIFFS,
v.
ST. LUKE'S HEALTH SYSTEM, LTD, DEFENDANT.



The opinion of the court was delivered by: Honorable B. Lynn Winmill Chief U. S. District Judge

MEMORANDUM DECISION AND ORDER

INTRODUCTION

The Court has before it a motion for preliminary injunction filed by plaintiff St. Al's.*fn1 The Court heard oral argument on December 14, 2012, and the motion is now at issue. For the reasons described below, the Court will deny the motion.

FACTUAL BACKGROUND

Plaintiff St. Al's seeks to enjoin defendant St. Luke's from acquiring Saltzer Medical Group. The acquisition, St. Al's argues, would give St. Luke's such a dominant market share in Nampa that it could raise prices and block referrals to St. Al's in that market.

St. Al's runs four hospitals; its flagship hospital is in Boise and its second-largest facility is in Nampa.*fn2 Defendant St. Luke's operates hospitals in Boise, Meridian, and Twin Falls, among other locations. Saltzer is an independent physician group based in Nampa. It consists of about 40 physicians, including 16 physicians who provide adult primary care services and 8 physicians who provide pediatric services out of the Saltzer Main Clinic in Nampa.

By the terms of the proposed acquisition, St. Luke's agrees to acquire all of Saltzer's furniture, fixtures, and equipment, and the two entities will execute a Professional Services Agreement ("PSA"). Under the PSA, Saltzer's physicians will provide medical services on behalf of St. Luke's, mostly in clinics operated by St. Luke's, and in return, St. Luke's agrees to compensate Saltzer and its physicians for performing those medical services. St Luke's will conduct all managed-care contracting and billing for the Saltzer physicians and staff. On January 1, 2013, all Saltzer non-physician employees who accept St. Luke's offer of employment will become employees of St. Luke's.

In the Nampa market, Saltzer accounts for 43% of the adult primary care physicians and about 90% of the pediatric physicians. See Haas-Wilson Declaration (Dkt. No. 22-23) at ¶ 18a. St Luke's accounts for about 24% of the primary care physicians in Nampa. Id. Thus, if St. Luke's acquired Saltzer, the combined entity would have about 67% of the adult primary care physicians in Nampa. St Al's argues that this market power would allow St. Luke's to negotiate higher fees with health insurers, leading to higher health insurance premiums. Id.

St Al's also alleges that it would suffer harm in the form of lower referrals. For example, Saltzer's adult primary care physicians accounted for 43% of the total adult primary care admissions at St Al's Nampa hospital. Id. at n. 13. And Saltzer's pediatricians accounted for 100% of the pediatric admissions at that same hospital from 2004 to 2012. Id. at ¶ 132. St Al's argues that if the merger occurs, St. Luke's will put pressure on Saltzer's physicians to steer patients away from St. Al's to St. Luke's for procedures such as CT Scans and MRIs, among other things. St. Al's predicts a large drop in referrals that would force it to lay off over 150 employees.

St. Al's points to St. Luke's purchase of over 20 physician practices in recent years as evidence of St. Luke's attempt to corner the market. See Reinhardt Declaration (Dkt. No. 22-20) at ¶ 2. St Luke's responds by pointing out that St. Al's is "part of the Trinity Health-Catholic Health Care System, the second largest non-profit health system in the country." See Savage Declaration (Dkt. No. 34-5) at ¶ 2.

Both the Federal Trade Commission (FTC) and the Idaho Attorney General are investigating the proposed acquisition. The Idaho Attorney General has asked St. Luke's to delay closing the deal to allow the office time to complete its investigation. See Exhibit D (Dkt. No. 22-5). The FTC is accelerating its investigation in order to finish it before the closing. See Exhibit B (Dkt. No. 22-3) at 6. Meanwhile, it appears that St. Luke's is proceeding with the closing before the end of the year. See Exhibit F (Dkt. No. 22-7) at 2.St. Al's filed this action against St. Luke's to enjoin its acquisition of Saltzer. The request for injunctive relief is based on Section 7 of the Clayton Act and Section 1 of the Sherman Act. To halt the deal before it closes, St. Al's filed a motion for preliminary injunction.

At a case management conference, the Court set the trial in this matter for July 29, 2013, and put the discovery process on a fast track. The analysis set forth below assumes that this case will be resolved expeditiously on this schedule.

ANALYSIS

Legal ...


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