Boise hospital fight: Saint Al's takes St. Luke's to court

adutton@idahostatesman.comNovember 12, 2012 

Rivals of St. Luke's Health System asked a federal court on Monday to keep the system from buying Saltzer Medical Group, the largest private practice in Nampa. St. Luke's plans to complete the buyout this year.

The Saint Alphonsus Health System and the small physician-owned Treasure Valley Hospital in Boise said the acquisition would erode competition, drive up medical costs, hurt their businesses and force layoffs. It would give St. Luke's control over more than two-thirds of the primary-care providers in the Nampa area, they said.

St. Luke's says that calculation and other allegations in the lawsuit are flawed. Its internal research found that the acquisition would give St. Luke's just 28 percent of the primary-care providers in the area, said spokesman Ken Dey.

"We're disappointed that they chose to challenge this transaction, " Dey said. "We really believe this is a beneficial relationship for the community (and would provide) higher-quality care, more comprehensive care."

Here are questions and answers about Saint Alphonsus' lawsuit.

Q: Would it really hurt competition?

A: That's something the Federal Trade Commission and Idaho Attorney General Lawrence Wasden are trying to figure out as they pursue an antitrust investigation, separate from the lawsuit. Deputy Attorney General Brett DeLange sent the system a letter last week, saying the decision to close on a deal is counterproductive and seems "designed to invite litigation."

According to the lawsuit, the FTC is accelerating its investigation of the Saltzer deal.

Here's what Saint Alphonsus and Treasure Valley Hospital say:

• Referrals and admissions from a practice dry up when it is acquired by St. Luke's.

St. Luke's says it doesn't direct referrals. Any shift is a result of several factors, such as doctors' preferences, St. Luke's says.

• St. Luke's has a 58 percent share of the inpatient hospital market for Ada and Canyon counties. Saint Alphonsus has about 35 percent, and Treasure Valley Hospital has about a half-percent share. West Valley Medical Center, which isn't part of the lawsuit, has about 7 percent.

• Saltzer is the go-to medical provider for many patients in the Nampa area, and Saltzer doctors tend to refer patients to each other.

• St. Luke's bought 22 physician practices - half of which were primary care - and added more than 200 doctors to its payroll in the past four years. It also has bought surgery centers.

The health system does not deny that is growing but says it is following the law and building an organization that can improve patient health and lower costs. St. Luke's officials cite the benefits of their acquisitions, such as an increase in the share of Medicaid and Medicare patients taken by doctors after they join the system, which treats all patients regardless of their ability to pay.

• The Saltzer acquisition would essentially give St. Luke's a monopoly on pediatric care in the Nampa area. Saltzer now employs all but one of the general pediatricians in Nampa, the lawsuit said. "We think they've grossly over-inflated" how much of the Nampa area's health care market St. Luke's would gain, Dey said.

Wasden's office did not respond Monday to a request for comment.

Q: Would the acquisition raise medical costs?

A: The lawsuit compares St. Luke's plans in Nampa with its hospital and clinic acquisitions in the Magic Valley, where St. Luke's now owns two hospitals. It controls all the pediatrics, urology and neurology in the area and 70 percent of all the doctors, according to the lawsuit. As a result, St. Luke's has been able to charge higher prices and receive higher payments from at least one health insurance plan, according to the suit.

Dey questioned the accuracy of the 70 percent claim.

Charges for an office visit or a procedure, such as an X-ray, go up when a physician becomes part of any hospital system. Both of the Boise-based health systems say there are reasons for the higher charges, such as making up for losses on underinsured and uninsured patients and covering their more expensive overhead.

The cost of medical care "will be worse than it currently is in the Treasure Valley if more acquisitions are permitted, " said David Ettinger, an attorney for Saint Alphonsus.

"This significant change in the negotiating dynamic will give St. Luke's much-enhanced bargaining clout in contract negotiations and the ability to extract higher rates for inpatient services at all of its hospitals" from health insurers, according to the lawsuit.

Q: How would it affect employees and the community?

A: According to the lawsuit and an attorney for Saint Alphonsus, the Nampa hospital would be forced to lay off 140 employees and cut back on services. Treasure Valley Hospital would lay off 10 percent of its staff or change its capital improvement plans, it said.

The Saint Alphonsus hospital in Nampa is a safety-net facility that provides charity care to local patients. If its admissions go down after Saltzer is part of St. Luke's, that will put Saint Alphonsus under "stress that's going to endanger a lot of things, including care to the poor and uninsured, " Ettinger said.

Q: Why is this even happening?

A: St. Luke's executives claim that their buyouts are not meant to boost market share but are part of a process of creating a better system. St. Luke's doesn't court doctors hoping to employ them or buy their practices in most cases, executives say. Many of them, like Saltzer, want that kind of arrangement.

St. Luke's isn't alone. Health systems across the country are being scrutinized for possible anti-competitive growth. At the same time, they are being encouraged to become robust organizations.

Federal agencies have recognized the potential for crossing the line and have offered to do antitrust reviews. St. Luke's did not request a review.

Audrey Dutton: 377-6448, Twitter: @IDS_Audrey

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