Linda Duer, executive director of the Idaho Physicians Network, remembers the evening one of the network’s board members, Dr. Randell Page, broke some big news: His business, Saltzer Medical Group, was probably going to sell itself to St. Luke’s Health System.
The conversation happened two years ago, long before Saltzer made the leap and joined St. Luke’s — a decision that prompted a trial now underway in U.S. District Court.
Saltzer has dozens of doctors on staff and, at the time, was the largest group of its kind in Idaho. But according to Duer, Page told her that night that Saltzer’s future was uncertain and he worried that the fast-growing St. Luke’s system might squeeze Saltzer out if they didn’t join forces.
Duer’s Sept. 25 testimony was initially redacted from trial transcripts but released publicly this week.
U.S. District Judge Lynn Winmill is presiding over a lawsuit in which the Federal Trade Commission, Idaho attorney general, Saint Alphonsus Health System and Treasure Valley Hospital allege that St. Luke’s and Saltzer broke antitrust laws when Saltzer sold itself to St. Luke’s at the end of last year. The trial began Sept. 23.
The lawsuit hinges on whether the Saltzer buyout would reduce competition for primary medical care in the market Saltzer serves.
St. Luke’s argues that its buyout is actually good for competition and is vital to building an insurance network of its own — one that would pay for quality instead of quantity.
During a break in that 2011 board meeting, Duer and Page met up in the lobby of an insurance company’s office, she said.
“What the hell are you doing, Randy?” she recalled asking, referring to his announcement that Saltzer would probably sell to St. Luke’s.
“Linda, I’m damned if I do, I’m damned if I don’t,” Duer said Page told her. “If I do it, everyone will be mad, everyone will be upset. If I don’t, St. Luke’s will build a clinic wherever I go. They have more money; they have more resources.”
Page went on, she said.
“They are already building the specialist clinic out by Costco,” Duer remembers Page telling her. “There is no way that I can compete with that.”
That was the only reason he offered for wanting to sell to St. Luke’s, Duer told a lawyer for the Idaho attorney general.
A St. Luke’s attorney objected to Duer’s testimony, but Winmill overruled the objection.
The Idaho Physicians Network includes doctors who, through IPN contracts, can see 236,000 patients who are covered by various insurance companies.
Duer has been executive director for 13 years and said the Idaho Physicians Network is the second largest in the state. Blue Cross of Idaho has the largest network, she said.
An attorney for St. Luke’s later pointed out that Duer’s business — a network of about 13,000 providers statewide — competes with a St. Luke’s-affiliated network.
Duer testified that she worried about whether networks like hers can survive the changes in reimbursement brought by the Affordable Care Act, such as paying for quality instead of quantity — a goal St. Luke’s says it can only achieve by acquiring groups like Saltzer.
ECONOMIST: REFERRALS DROP
Saint Alphonsus, the largest St. Luke’s competitor, brought economist Deborah Haas-Wilson to court Thursday morning to back up its claims that St. Luke’s owning Saltzer would cause a staggering drop in admissions to its hospitals and referrals to its doctors.
“There are very few rivals in this market for St. Luke’s, and only one — Saint Alphonsus — that has enough, a high enough market share, to really provide some competitive constraints on St. Luke’s inpatient market,” she said. “It’s close to a duopoly.”
Haas-Wilson looked at data, including insurance claims, to see whether St. Luke’s-acquired doctors would “steer” patients to St. Luke’s once they became part of the system. She looked at five different areas of medical care.
St. Luke’s says it does not, in any way, pressure doctors to keep patients inside the system. A witness early in the St. Luke’s trial said the system’s software at one point made a “default” referral to other St. Luke’s doctors and centers. But St. Luke’s CEO David Pate and others have said physicians are encouraged to use their best judgment.
Haas-Wilson told Winmill that, historically, when St. Luke’s buys a doctors’ practice, admissions to Saint Alphonsus hospitals drop “dramatically.”
St. Luke’s has offered some explanations for these drops in admissions and referrals, such as physicians sometimes using “hospitalists” to admit patients instead of admitting the patients under their own names. Haas-Wilson said her data refuted those explanations.
A St. Luke’s lawyer noted that Haas-Wilson did not consider whether Saint Alphonsus still had plenty of patients coming through the doors after losing the St. Luke’s referrals. That could mean it isn’t being harmed.
Treasure Valley Hospital administrator Nick Genna, whose small surgical hospital in Boise also is suing St. Luke’s, said a group of orthopedic surgeons had about 490 procedures at Treasure Valley Hospital before the surgeons group was purchased by St. Luke’s. That dropped to zero two years later, after it was owned by St. Luke’s, he said.
Audrey Dutton: 377-6448, Twitter: @IDS_Audrey