With the first week in the Federal Trade Commission's (FTC) and Idaho attorney general's antitrust trial challenging St. Luke's Health System's (St. Luke's) acquisition of the Saltzer Medical Group (Saltzer), a for-profit, physician-owned, multispecialty group comprising approximately 44 physicians located in Nampa, Idaho, already in the books, a lot more is at stake than just whether St. Luke's is eventually ordered to unwind its acquisition of Saltzer.
As reported previously, the FTC and Idaho attorney general are 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 percent. The newly-combined primary care practices, they allege, give St. Luke's greater bargaining leverage with healthcare plans, with higher prices for services eventually being passed on to local employers and their workers. Other local hospitals contend that the combination may choke off their access to inpatient admissions referred by Saltzer physicians.
So, what's 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 could prompt the FTC to turn its focus to completed hospital-physician deals in an effort to build the experience needed to win such challenges.
Commissioner Wright's comments echo those made by FTC Chairwoman Edith Ramirez earlier this summer. 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." Beginning with the Evanston case in 2007, the result from this new approach 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," according to Chairwoman Ramirez.
Since healthcare "remains a top agency priority," Chairwoman's 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 physicians 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."