Saint Alphonsus threatens suit over St. Luke's Weiser deal

A nine-page letter suggests a small town near Idaho's western edge could become ground zero for another multimillion-dollar court battle between two oligarchs of the state's health care industry.

Saint Alphonsus Health System's lawyers sent the letter March 4 to executives at St. Luke's Health System and Weiser Memorial Hospital.

"We are writing to express Saint Alphonsus' serious concerns about St. Luke's impending acquisition of Weiser Memorial, which Saint Alphonsus believes will violate federal and state antitrust laws," the letter begins. "We have conducted a detailed investigation of the Weiser acquisition and the markets which it impacts. ... We have concluded that the transaction is anticompetitive and will cause substantial harm to the public as well as Saint Alphonsus."

St. Luke's has long planned to acquire the small, publicly owned hospital in Weiser, about 60 miles northwest of Boise in Washington County.

If this sounds familiar, that's because it echoes the early days of an antitrust lawsuit initiated by Saint Alphonsus and Boise surgical center Treasure Valley Hospital, and joined by the Federal Trade Commission and Idaho Attorney General Lawrence Wasden. They sued St. Luke's over its 2012 buyout of Saltzer Medical Group in Nampa.

That lawsuit played out over more than two years. A federal judge in Boise ruled that St. Luke's broke antitrust laws when it bought Saltzer. The takeover included employment of dozens of physicians, which could give St. Luke's too much bargaining power over health insurers, the judge said. An appeals court upheld the ruling.

St. Luke's said Saint Alphonsus aims to distort facts to derail the proposed partnership in Weiser. "In our view, the community in Weiser decided, by an 83 percent favorable vote, they wanted their local hospital to integrate with St. Luke's," said Christine Neuhoff, the health system's chief legal officer.

IT'S ABOUT REFERRALS

The letter says Saint Alphonsus hired an economist to determine whether Saint Alphonsus' hospital in Ontario would lose business if St. Luke's buys the Weiser hospital, which is 19 miles away.

The answer: yes.

"The Weiser transaction will cause a significant shift in referrals by the physicians and mid-levels that St. Luke's currently employs in the area," the letter says. "We also expect Weiser Memorial to shift its emergency room referrals to St. Luke's facilities in Boise and Meridian," which are more than an hour's drive away.

The CEO of Weiser Memorial Hospital called that a "ridiculous" claim.

"It's upsetting to me to have a threat like this when we have ... worked with this hospital in Ontario for years," CEO Tom Murphy said.

That's the same kind of referral-steering that Saint Alphonsus, Treasure Valley Hospital and state and federal lawyers alleged in the Saltzer trial.

Saint Alphonsus now says it will sue St. Luke's for treble damages, to the tune of $80 million, if that happens in Weiser.

Despite its contention that lost referrals would happen, Saint Alphonsus will not try to block the deal, for now.

"At this time, we do not plan to pursue a preliminary injunction, but it is always possible that circumstances could change," said Joshua Schlaich, media coordinator for Saint Alphonsus Health System. "We still hope that the anticompetitive actions we expect will not occur. If those anticompetitive actions do not occur, we do not anticipate litigation."

WEISER'S TAKE

There is no reason for doctors to stop sending patients to nearby St. Luke's competitors, Murphy said.

"I don't really want to get in the battle between St. Luke's and Saint Alphonsus," he said. "Our focus in Weiser is to put us on more sure footing, to be viable for the next several years and be an access point for health care in the community."

Murphy said selling the hospital to St. Luke's is a survival decision. Critical-access hospitals like Weiser Memorial are under financial stress. They find it hard as stand-alone businesses to adapt to rapid changes in Medicare payments and health technology.

Murphy said that joining St. Luke's is about "securing access to health care for the long term for the community."

ANOTHER WRINKLE

This isn't the first time St. Luke's and Weiser Memorial Hospital have received a legal warning about their plans.

The acquisition drew scrutiny by the Idaho Attorney General's Office in recent months, because the deal is premised on St. Luke's receiving tax revenues from the special hospital taxing district that now owns the hospital.

The Idaho Statesman reported in January that St. Luke's has acquired hospitals in McCall and Mountain Home under similar arrangements. With Weiser included, St. Luke's will receive almost $3 million per year in tax revenues.

The Attorney General's Office in January told St. Luke's and the Weiser hospital taxing district that the tax-revenue arrangements are unconstitutional - and that a lawsuit may follow.

The office declined to comment last week on the Saint Alphonsus letter's antitrust allegations.

St. Luke's argues that those tax deals are legal and vital to the success of the critical-access hospitals they're buying.

St. Luke's plans to seal the deal with Weiser on Oct. 1, as long as it can assuage some of the state's legal concerns.

Murphy said he expects to know in early summer whether they're on track to hit that Oct. 1 target.

"We will not close the transaction until the attorney general is satisfied with the agreements," he said.

Audrey Dutton: 377-6448, Twitter: @IDS_Audrey

This story was originally published March 22, 2015 at 12:00 AM with the headline "Saint Alphonsus threatens suit over St. Luke's Weiser deal."