It was during the Clinton administration, David Pate said, that he started thinking about how to fix the nation’s money-sucking health care system and make people healthier.
He started thinking even harder in 2001, when doctors diagnosed cancer in Pate. Then a primary-care physician and hospital administrator in Houston, he became a patient trying to navigate the health care marketplace.
Pate came to Idaho four years ago to lead St. Luke’s Health System, where he is trying to “transform health care,” he told a federal judge Tuesday.
After two weeks of plaintiff testimony, Pate was the first person to testify in defense of St. Luke’s, the Boise-based hospital system that is being sued by two competitors, the state and the federal government over a buyout of a nearby medical practice.
Saint Alphonsus Health System, Treasure Valley Hospital, the Federal Trade Commission and Idaho Attorney General Lawrence Wasden accuse St. Luke’s of breaking antitrust laws by buying Nampa-based Saltzer Medical Group last year. They say the buyout gives St. Luke’s a nearly 80 percent share of the primary-care market in Nampa.
Pate told U.S. District Court Judge B. Lynn Winmill that St. Luke’s decided to hire the doctors at Saltzer because it was the only way for both businesses to give patients lower-cost, higher-quality health care in the Nampa area. Attorneys for St. Luke’s opponents suggest that the system’s desires weren’t that altruistic.
When Saltzer asked to join the system, St. Luke’s patients had been driving from their homes in Canyon County to Meridian to see doctors and have surgeries.
“We are running out of capacity at our St. Luke’s Meridian Medical Center,” Pate said.
With 30 percent of Meridian patients coming from the western Treasure Valley, St. Luke’s faced a choice: Build a new hospital in Nampa or add to the Meridian hospital, Pate said. St. Luke’s leaders decided it would be best to build a hospital. Having Saltzer on board would be “tremendously impactful” to reaching patients in Nampa, he said.
Pate also discussed St. Luke’s new partnership with Utah-based insurer Select-Health. St. Luke’s is insuring its own workers through the provider and encouraging patients to choose Select-Health instead of other insurers.
He said the partnership allows St. Luke’s to keep 90 cents of each dollar of policyholders’ premiums, compared with the usual 80 cents from Idaho’s dominant insurers, Blue Cross of Idaho and Regence BlueShield of Idaho. That furthers St. Luke’s eventual goal of rewarding doctors for doing efficient work instead of paying them for each service they perform, he said.
The extra money “allows us to invest in health and allows us to (make) physicians whole” as the system makes that transition, he said.
The SelectHealth partnership has been in full swing for about eight months. The plan is set up to eventually shift the financial risk of health care onto St. Luke’s — in essence, holding back money if St. Luke’s patients’ medical bills are too expensive or giving it more money if the bills are low.
“Right now, in a fee-for-service (system), I’m always thrilled when my hospitals are full,” he said. That wouldn’t be true in a pay-for-performance system, he said.
SelectHealth CEO Pat Richards also testified Tuesday. Richards said the pay-for-performance insurance plan that St. Luke’s is hanging its Saltzer deal on hasn’t taken effect.
It will be at least two years before St. Luke’s will have any financial risk or reward under the contract, she said. The plan currently operates as a conventional fee-for-service model.
The incentives for quality will kick in later, allowing St. Luke’s to keep whatever money it saves the plan by providing efficient services. Pate has said he will pass those savings on to St. Luke’s health care providers to reward them for good work.
“The mechanics (of how that will work) are not defined today,” Richards said. “I don’t believe St. Luke’s or (its provider network) have that capacity built yet” to take on full financial responsibility for giving patients efficient care instead of expensive services.
Richards said the five-year plan between Select-Health and St. Luke’s is on track, however.
“We are on budget,” she said.
Two key arguments that St. Luke’s opponents have made are that the system is employing doctors in a way that reduces competition for health care and that, once employed, those doctors stop sending patients to competitors.
While Pate was on the stand, an attorney for Saint Alphonsus pulled out an article Pate had written. It stated, in part:
“(The) increase in hiring of physicians is itself a driver of more physician employment. If one hospital in a market is offering physician employment, other hospitals may feel the pressure to offer employment in order to preserve market share and access to patients.”
Pate also wrote that specialists feel pressure to follow other doctors into hospital employment so that they can “preserve the referral base.”
Asked whether he still believes those words, Pate said yes. He later said he was speaking to a national audience and “commenting on the national scene (in) health care ... not describing the specifics of the Idaho market.”
The Saint Alphonsus attorney, David Ettinger of Detroit, then asked whether St. Luke’s keeps patients away from competitors.
Pate had said earlier that St. Luke’s does not tell doctors where to send patients for lab tests, X-rays, specialist care or any other services.
“I wouldn’t tolerate it,” he said. “I would find it highly objectionable.”
Pate said he couldn’t imagine Nampa doctors, such as Saltzer’s, not sending patients to Saint Alphonsus Medical Center-Nampa because it is, for now, the only hospital in Nampa.
But Ettinger challenged him, showing him an email from a Saltzer physician that Saint Alphonsus obtained during the pretrial discovery process. “Are you able to say whether St. Luke’s executives declined to offer Saltzer (referral) autonomy?” he asked.
Pate said he could not guarantee it. He later said the email was sent before the terms of the Saltzer buyout were set.
Defense arguments will continue Wednesday.
JUDGE RULES TRIAL CAN STAY PARTLY CLOSED
Media organizations intervened to open testimony and transcripts.
U.S. District Court Judge B. Lynn Winmill ruled Tuesday that testimony and documents can remain hidden from the public in a trial against St. Luke’s Health System. But attorneys must show a “compelling” reason for hiding that information.
Lewiston lawyer Charles Brown argued on behalf of news organizations that Winmill should allow public and media access to everything presented in the lawsuit. The news organizations include the Idaho Statesman, the Associated Press, the Times-News in Twin Falls, the Idaho Press-Tribune in Nampa, the Lewiston Tribune, the Moscow-Pullman Daily News and the Idaho Press Club.
Every other party to the lawsuit opposed the news organization’s request.
“I agree with Mr. Brown, this is a [trial] of great interest to the public,” Winmill said. “The problem in this case is also very unique.”
Businesses’ request to protect trade secrets could be revealed during the trial, harming them, the judge said.
“We can’t, I think, [protect trade secrets] with a broad axe. We can't do it with a scalpel,” he said. He characterized his Tuesday order as “something in between.”
Winmill ruled the week before the trial began in late September that businesses involved in the case could designate documents and witness statements for “attorneys’ eyes only,” making them closed to the public and to some employees of the businesses. He acknowledged the public’s well-established right to an open trial but said businesses should be allowed to protect their trade secrets.
As a result, more than half of the first two weeks of the four-week trial was closed to the public.
Winmill ordered lawyers for the businesses and for the Federal Trade Commission and Idaho attorney general to file affidavits over the next week explaining why each sealed document and witness statement should be closed to the public.
Winmill also said he will review the documents and testimony to make sure businesses are not misusing their “trade secret” status. He offered Brown the ability to review the documents as long as he does not disclose their contents to the news organizations, but Brown said the judge has the responsibility to be the “gatekeeper” of the public’s right to know.
The parties in the lawsuit as well as third parties — Blue Cross of Idaho, Regence BlueShield of Idaho, Micron Technology and Primary Health Medical Group — have had the ability to make the closed-court and sealed-document designations during the trial.
Audrey Dutton: 377-6448, Twitter: @IDS_Audrey