St. Luke's case judge: Necessity key issue

During closing arguments at the hospital's antitrust trial, he poses difficult questions.

adutton@idahostatesman.comNovember 8, 2013 

Almost a year to the day since St. Luke's Health System was sued by two competitors, the judge hearing the case wondered aloud about the decision he faces:

Whether Idaho's biggest hospital and clinic business really needs to buy independent physician practices to bring about its promised long-term cost savings and improved care, or whether the health system has gone too far to curb competition.

U.S. District Judge B. Lynn Winmill posed some questions Thursday to a throng of lawyers in his Boise courtroom.

Is the St. Luke's acquisition of Nampa's Saltzer Medical Group — previously Idaho's largest independent practice — totally necessary for St. Luke's to achieve its stated goal of integrated health care that rewards doctors for efficient work andpenalizes them for low-quality care?

Is it so critical that the buyout should be allowed even if it increases St. Luke's market share for Nampa's primary care eight times as much as what's presumed illegal under federal guidelines?

Or is health care such a peculiar industry and so firmly headed down a path of mass consolidation that it deserves a little more leeway under federal antitrust laws?

Lawyers took cracks at answering those questions during almost six hours of closing arguments from the plaintiffs — the Federal Trade Commission, the Idaho attorney general, Saint Alphonsus Health System and Treasure Valley Hospital — and the defendants, St. Luke's and Saltzer.

The arguments wrapped up a trial that lasted four weeks in September and October on the plaintiffs' charges that the St. Luke's purchase of Saltzer last year gave it overwhelming and illegal dominance of Canyon County's primary medical care.

WORDS AND PICTURES

David Ettinger, a Detroit-based antitrust lawyer representing Saint Alphonsus, sought to pierce a major St. Luke's argument — that it will take years for the positive outcomes of the Saltzer deal to surface. He called that a "Wimpy" defense, a reference to the Popeye character who says, "I would gladly pay you Tuesday for a hamburger today."

Jack Bierig, a Chicago lawyer for St. Luke's, matched Ettinger's attempt to mix piercing words with comic relief. Bierig showed the courtroom a photograph of a bulldog sulking on a couch to illustrate his defense, dubbed the "dog that did not bark." Bierig said the state, federal and private plaintiffs were wrong to say that St. Luke's sought Saltzer so it could profit from control of the Canyon County market. In terabytes of documents and data, none of the plaintiffs found evidence of any such intent by St. Luke's, he said.

Most of the day's arguments lacked comedy — all withering critiques and logic debates.

Tom Greene, a California lawyer for the Federal Trade Commission, said the trial "is about power and money" and "rhetoric versus reality."

He and other lawyers argued that the buyout will raise prices and won't lead to better health care. They claimed that St. Luke's has no unique ideas. They said other health care entities have accomplished the same goals St. Luke's has without swallowing competitors or reducing the number of independent doctors along the way.

Bierig, however, cited pricing data that showed St. Luke's had saved patients money. He said in the Magic Valley market, St. Luke's persuaded previously independent doctors to accept lower payments from insurers and to join a lower-priced Blue Cross of Idaho network.

He also cited a handful of federal court cases in the past 20 years that support St. Luke's arguments. The law "does not require this court to put a straitjacket on St. Luke's and say there is one road," Bierig said. "It's not yet clear which road will lead to the best outcome for patients. ... The determination of the best road is the function of the market, not this court."

Ruling against St. Luke's is "the wrong way to fill a prescription to advance consumer welfare in this valley," Bierig said. The "right medicine" is to let the buyout happen, he said.

JUDGE WEIGHS COMPROMISE

St. Luke's told the judge in a brief filed under seal that it wants to keep Saltzer. But if that's not OK with Winmill, a hybrid merger could work, the system's lawyers said.

Under the hybrid approach, St. Luke's would still own Saltzer and employ its doctors. The two entities would negotiate their traditional payment-for-volume contracts with health insurers as separate companies. St. Luke's lawyers say that should quell opponents' worries that Saltzer would use the market power of its owner to force higher payments from insurance companies.

But the hybrid plan would preserve St. Luke's plans to have an efficiency-based contract with Utah insurer SelectHealth - a plan St. Luke's says it can't pull off without Saltzer. St. Luke's would include Saltzer in those payment negotiations.

Winmill said that kind of remedy could "blunt the effects" on competition while allowing "some form" of the buyout to happen so that St. Luke's could "achieve the integrated health care system" it says it's creating.

"No one has proposed anything but a winner-take-all ... (which) means someone is going to be injured," Winmill said. "I have to be mindful of those concerns."

Opposing lawyers said that if St. Luke's is serious about dropping its traditional insurance models and moving toward efficiency-based contracts, then eventually Saltzer would be involved in all negotiations. The lawyers asked Winmill whether he wanted the courts to spend years policing St. Luke's and Saltzer to make sure they complied with the terms of such a deal.

They also urged Winmill not to act as a "social engineer" by making a judgment call about whether a hospital's plan to ease a health care crisis is enough to trump antitrust laws and guidelines.

Ettinger said St. Luke's is asking Winmill to decide: "What's more important? High prices, high market share or these quality gains (St. Luke's and Saltzer) say they're going to achieve? ... You don't have that power. ... Congress hasn't given it to you."

DECISION ON THE WAY

Winmill said the trial was "undoubtedly one of the most difficult" he's had to preside over, because the "stakes are extremely high not only for the entities here, but for the community."

The judge said he usually knows which way he's leaning by the end of a trial. Not this time, he said. Winmill said he likely will come to a conclusion as he is writing his decision.

He said to expect that ruling sometime in the next few weeks, with the caveat that his schedule is full and that he will need to attack the St. Luke's decision in bits and pieces.

Audrey Dutton: 377-6448Twitter: @IDS_Audrey

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