St. Luke's trial reveals power struggles

A witness who worked for both sides tells of tensions between insurers, medical groups.

adutton@idahostatesman.comOctober 1, 2013 

Nancy Powell spent two months mulling over whether to quit her longtime job as chief financial officer of Idaho's largest independent medical group. On Halloween 2011, she made her choice, leaving Saltzer Medical Group in Nampa to become chief administrative officer of a medical group owned by Saint Alphonsus Health System, the second-largest health system in Idaho.

Just shy of two years later, Powell took the stand in U.S. District Court to testify as part of a lawsuit between her current and former employers. Saint Alphonsus, the state and federal governments and a small surgical hospital are suing St. Luke's Health System and Saltzer Medical Group, alleging they broke antitrust laws when Saltzer sold itself to St. Luke's last year.

Powell is one of few people to have an inside view on both sides.

'BAD FAITH'

While she was at Saltzer, Powell said, the group "threatened many times" to pull out of the Blue Cross of Idaho network because the insurance company wouldn't grant Saltzer, then owned by physicians, the kind of contracts it wanted, Powell said in court Friday.

In the end, Blue Cross always won, she said.

"You can't walk away from 22 percent of your business," Powell said, referring to how many of Saltzer's patients had Blue Cross insurance plans.

Saltzer tried to convince Blue Cross to sign a "gain-sharing" contract, but the insurer stopped short of that, Powell said. The businesses did end up making a deal that gave Saltzer more money to hit certain goals related to patient health, such as controlling high blood pressure.

A lawyer for St. Luke's asked Powell whether she said Blue Cross had rejected Saltzer's attempts at getting more money "based on [the insurer's] desire to keep the profits for itself?"

"Sounds like something I would say, yes," she replied.

"Did you believe they were negotiating, at certain times, in bad faith?" the lawyer later asked her.

"Yes," Powell said. "I put it in writing one time to Blue Cross."

UNUSED POWER?

Powell's testimony touched on points that the Federal Trade Commission, Idaho Attorney General and St. Luke's rivals are making before Judge B. Lynn Winmill. They want to convince Winmill that St. Luke's will harm competition and force insurers to pay higher prices if it is allowed to keep Saltzer, which has dozens of health care providers.

To prove their point, St. Luke's opponents say prices spiked in the Magic Valley as St. Luke's bought more of the primary care offices in the area.

Powell recounted a conversation with a St. Luke's executive. He told her that, based on his experience in the Magic Valley, "he thought [Saltzer] had more power with Blue Cross than we were utilizing," Powell said. "The strength of the network [in the Twin Falls area] gave them more negotiating power with Blue Cross than maybe they had in other parts of the state."

But she later told a St. Luke's attorney that the executive did not say St. Luke's had used its leverage to force Blue Cross to pay higher prices.

St. Luke's hopes to prove that it will be hard — if not impossible — for Saltzer to stay open and recruit new doctors if St. Luke's is forced to release it.

Powell said she didn't think it would be hard for a group as established as Saltzer, with a large number of primary care doctors, to find new physicians. But she acknowledged that never during her tenure at Saltzer had seven of the top-earning doctors left in a single year - something that happened last year, as a result of disagreements over the buyout.

BEING SWITZERLAND

Powell left the Nampa group more than a year before it joined St. Luke's. She said Friday that she opposed selling the practice to a hospital while she was at Saltzer.

Back then, she said, she "would prefer that we remain independent, because we have the opportunity to be Switzerland."

Audrey Dutton: 377-6448, Twitter: @IDS_Audrey

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