St. Luke's poised to run Elks Rehab

The deal is still being negotiated, but the hospitals have notified antitrust regulators.

adutton@idahostatesman.comApril 12, 2014 

0119 local miracle2

Elks Rehab Hospital will soon be run by St. Luke's if an upcoming deal goes through. The hospital is dedicated to help patients rehabilitate and return to a normal life. Here, Mark Trail gets help from physical therapist Ryan Donahue at the Idaho Elks Rehabilitation Hospital in Boise in 2009.

DARIN OSWALD — Darin Oswald/Idaho Statesman Buy Photo

Don't call it a buyout, says Charles Schmoeger, board chairman of the Elks Rehab System.

The takeover is not an acquisition, a merger, an expanded partnership or an affiliation, he says.

Instead, the Elks system - a nonprofit hospital and outpatient organization that does everything from inpatient rehabilitation to hyperbaric-chamber wound care to hearing and balance therapy - is in negotiations for St. Luke's Health System to take control of all of the Elks system's programs at the main hospital in Downtown Boise and at other locations in southern Idaho.

Schmoeger said Friday he was "not at liberty" to talk about whether, or how much, money would change hands.

Elks wants St. Luke's to hire "the vast majority" of its 800-plus employees, Schmoeger said.

State and federal antitrust regulators have been notified of the proposed transaction, which came to light in documents the Idaho Statesman obtained under a public records request. The Idaho attorney general's office has asked for information about the businesses and their market share.

The takeover would come in the middle of a lawsuit over a different St. Luke's transaction - its multimillion-dollar purchase of the Saltzer Medical Group in Nampa. That deal prompted the Federal Trade Commission, Idaho Attorney General Lawrence Wasden, Saint Alphonsus Health System and Treasure Valley Hospital to sue, arguing that St. Luke's breached federal antitrust laws and harmed competition for primary care in the Nampa market.

U.S. District Judge B. Lynn Winmill ruled in January that the buyout was illegal. St. Luke's plans to appeal that ruling. Meanwhile, St. Luke's has asked to keep ownership of Saltzer during the appeals process, which could take years.

Saltzer and St. Luke's cited the changing environment for health care - from technology to health-insurance payments - as a reason for that acquisition. Similar struggles are affecting the Elks' bottom line.

"We're just finding it very, very difficult to negotiate in this health care environment right now, and our programs have been losing money," Schmoeger told the Idaho Statesman on Friday.

Elks tax filings for the past few years show slim margins, with the system bringing in $27 million to $35 million in revenue each year but coming away with less than $1 million after paying bills and salaries.

The hospital is treating fewer patients because of higher deductibles, pared-back therapy coverage and a shift toward putting rehab patients into skilled-nursing facilities instead of hospitals, he said.

"These programs need to be in a (larger health) system," Schmoeger said. "We are going to continue as a philanthropic organization to support rehabilitation," but only through behind-the-scenes support or grants for rehab services statewide, he said.

The 65-bed hospital in Boise would remain. The name is undetermined.

"In my way of thinking, it would still be under the name Elks Rehab," Schmoeger said. "The Elks will still own the physical building, but the programs within the building would be provided by St. Luke's."

Elks and St. Luke's have partnered for years on several programs. They started a joint venture in the mid-1990s for outpatient physical, occupational and speech therapy, as well as social services. Their main campuses also are a few blocks from each other - Elks at 600 N. Robbins Road and St. Luke's at 190 E. Bannock St.

"So it made sense we would go there first" with the idea, Schmoeger said. "They have been very receptive."

The transaction is not a done deal, he said. There is no set closing date, he said.

"We've been blessed over the years to have a great organization, and we've worked hard to save money, so we have some investments," but "we see the handwriting on the wall, and it's going to be more difficult to operate in this environment," Schmoeger said. "It would be foolish to continue."

A spokesman for St. Luke's declined to comment, referring questions to the Elks.

Audrey Dutton: 377-6448, Twitter: @IDS_Audrey

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