St. Luke’s targets Saltzer despite antitrust inquiry

adutton@idahostatesman.comAugust 16, 2012 

St. Luke’s Health System is Idaho’s largest private employer — about 10,500 workers this month — and it’s about to get larger through a deal the state’s attorney general asked it not to make.

The system is the focus of federal and state investigations into its practice of buying physician groups. The Federal Trade Commission and Idaho Attorney General Lawrence Wasden are studying whether St. Luke’s has broken laws aimed at blocking monopolies and preserving competition.

Wasden sent a letter in February to St. Luke’s officials asking the system to hold off on buying Saltzer Medical Group — a 50-year-old Nampa-based practice with 51 doctors — until the investigation ends.

If St. Luke’s were to acquire Saltzer today, the health system would employ almost half of the doctors in Nampa, based on a Statesman analysis of state licensing records.

“Having one more large acquisition in the mix complicates matters and would result in additional ... expense for all parties involved,” Wasden wrote, referring to the hassle and cost of unwinding the acquisition or going to court.

The health system yielded temporarily, saying it would put its Saltzer talks on hold for 90 days. That period ended June 7.

St. Luke’s now says it cannot wait any longer to pursue the buyout. It has, however, agreed to give the FTC and Wasden’s office 30 days’ notice before the purchase closes to evaluate the deal and its terms in relation to the investigation as a whole, said Ken Dey, a St. Luke’s spokesman.

“It really wasn’t prudent for us to delay our plans indefinitely,” Dey said. “It’s kind of a compromise, we hope, and they seem to be fine with it.”

Dey did not specify why it’s urgent for the deal to move forward, but said St. Luke’s had been well into acquisition talks with Saltzer when it learned of the investigation, which Dey said could take years. He said St. Luke’s wasn’t worried that Saltzer would sell to a competitor.

Representatives for Wasden and the FTC declined to comment.

Saint Alphonsus Health System said Saltzer should remain independent.

Saltzer, “the oldest independent physician group in Idaho, has provided quality care to the people of Nampa, and has been an outstanding and important partner to Saint Alphonsus Nampa in serving that community,” Saint Alphonsus said in a statement to the Idaho Statesman.

If St. Luke’s adds Saltzer, “which is also the largest independent physician practice in the state, to the more than 20 other physician practices it has acquired, this will seriously harm patient choice and give St. Luke’s even more control over health care. We believe that St. Luke’s should permit the antitrust investigation to run its course.”

A NEARLY DONE DEAL

The acquisition is “pretty much a ‘when’ and not an ‘if,’ ” Dey said. “We didn’t know how long it would take for (the FTC and Wasden) to act. ... We have to move forward with our business plan.”

Saltzer spokeswoman Janet Miller said the medical practice won’t necessarily be sold to St. Luke’s. She said Saltzer could join St. Luke’s through a contractual arrangement instead of an outright sale.

“I don’t think it’s been completely decided exactly how it’s going to look,” Miller said. “We’re all kind of wondering what’s happening next.”

But Dey said a purchase is the only deal the health system is negotiating.

St. Luke’s has been in a “holding pattern” and has not received any orders or subpoenas, Dey said.

The FTC has been investigating hospital systems as the health care industry becomes more consolidated. The commission recently accused a Reno hospital system of weakening local competition by buying two cardiology practices — acquisitions that gave the system 88 percent of the adult cardiology market.

The Reno hospital system, Renown Health, pushed its thumb even harder on the scale by having the newly hired doctors agree that they wouldn’t work for competitors, the FTC said. That gave Renown too much power over the price and quality of heart care in Reno, and it boosted the system’s bargaining power with insurers, which “may lead to higher prices” for consumers, the FTC said.

The hospital system and the FTC settled the complaint this month. Renown Health agreed to let some doctors find other jobs until a certain number are working for competitors. That investigation, like the one targeting St. Luke’s, involved the state’s attorney general.

DOCTOR SHARE

The St. Luke’s health system has 358 doctors on its payroll in Idaho and Oregon, up from about 300 in July 2011 and about 200 the year before that.

An additional 813 doctors have privileges and contracts to practice at St. Luke’s hospitals and clinics. These include the doctors who staff its Boise, Meridian and Nampa emergency rooms.

St. Luke’s employs about 6,300 people in the Treasure Valley.

The number of physicians and other employees working for St. Luke’s has shot up as independent practices seek shelter from a torrent of new health care rules, reimbursement changes and electronic-records requirements. Dey said the health system usually doesn’t pursue doctors unless they are in a high-demand specialty. Instead, most doctors approach St. Luke’s looking to join its staff.

In the past few years, St. Luke’s also bought or took ownership of a small hospital in Jerome, a small hospital in McCall, and a Treasure Valley diabetes center that it had co-funded with Saint Alphonsus.

The system includes a Twin Falls hospital it acquired in 2006 and rebuilt, and Elmore Medical Center in Mountain Home announced in May that it would join St. Luke’s.

Wasden hasn’t said which acquisitions are under scrutiny. Both federal antitrust laws and the Idaho Competition Act promote free marketplaces to protect consumers from higher costs, lower quality and fewer choices. The state law prohibits acquisitions that substantially lessen competition or create monopolies.

The health system isn’t adding doctors to its payroll because it’s greedy for market share, Dey told the Statesman in March. “We are going to come out OK, and we’re confident in how we’ve handled things,” he said.

Audrey Dutton: 377-6448, Twitter: @IDS_Audrey

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