Antitrust law is designed to help the Davids of the world maintain a level playing field with the Goliaths. That objective was realized when Boise, Idaho-based hospital operator St. Alphonsus Health System, Inc. (“St. Al’s”) sued rival St. Luke’s Health System, Ltd. (“St. Luke’s”), to block St. Luke’s acquisition of the Saltzer Medical Group (“Saltzer”), one of Idaho’s largest and oldest independent medical groups.
St. Al’s argued that St. Luke’s acquisition of Saltzer would give St. Luke’s such a dominant market share of the adult primary care market in Nampa, Idaho that it could raise prices and block referrals to St. Al’s by having Saltzer steer patients to St. Luke’s. St. Al’s fears certainly seemed well-founded: Saltzer accounted for 43% of the adult primary care physicians, and about 90% of the pediatric physicians in the Nampa market. Since St. Luke’s accounted for about 24% of the primary care physicians in Nampa, the combined entity would have about 67% of the adult primary care physicians in Nampa.
The Federal Trade Commission (FTC) and Idaho Attorney General (AG) launched their own investigations and ultimately joined St. Al’s lawsuit. Things didn’t go well initially for St. Al’s as the judge refused to preliminarily enjoin the acquisition, concluding that St. Al’s was unlikely to suffer irreparable harm before a trial could be held in the case. St. Luke’s proceeded to complete the transaction.
However, in January 2014, after a bench trial, the judge concluded that the deal would have anti-competitive effects in terms of raising health care costs due to the increased negotiating leverage of the combined entity. The judge directed St. Luke’s to unwind the transaction, and divest itself of Saltzer’s assets. St. Luke’s has appealed to the Ninth Circuit. At oral argument, St. Luke’s contended that the trial court had failed to adequately consider the deal’s benefits.
Along the way, the trial court had an opportunity to decide a motion by the FTC and Idaho AG to exclude the testimony of St. Luke’s economist, Dr. Alain Enthoven, concerning the quality-related benefits of the acquisition. Saint Alphonsus Med. Ctr. – Nampa, Inc. v. St. Luke’s Health Sys., Ltd., No. 1:12-CV-00560-BLW, 2013 WL 5637743 (D. Idaho Oct. 15, 2013). A major thrust of the objection was that Dr. Enthoven had not read any of St. Luke’s physician service agreements (“PSA’s”), and therefore could not credibly testify as to “whether the acquisition creates the requisite integration to achieve the purportedly greatest benefits of integrated patient care.”
The Court denied the motion. After reviewing the facts shared in the decision, the argument seems like a stretch and we feel the Court reached the right result. As the Court observed, despite not having read the PSA’s, Dr. Enthoven interviewed six top executives from St. Luke’s and Saltzer, and reviewed thirty depositions. The Court believed this effort enabled Dr. Enthoven to testify credibly concerning the quality-enhancing benefits of moving away from the fee-for-service model of compensation and toward the quality-based model of compensation.
The judge also rejected the FTC’s contention that Dr. Enthoven was unqualified to testify regarding how the use of health information technology, such as electronic medical records, promotes higher quality care in light of Dr. Enthoven’s admission at his deposition that he was not a “healthcare IT expert.” Observing that Dr. Enthoven was testifying as an economist, not a programmer, the judge ruled that Dr. Enthoven was qualified to explain how various healthcare IT tools promoted higher quality care even if he didn’t understand the mechanics of how those tools worked. This conclusion also seems correct, and not really a close call at all.
Do you agree with our conclusion that the Court made the right call in denying the motion to exclude Dr. Enthoven’s expert testimony?
