Saint Alphonsus Med. Center-Nampa Inc. v. St. Luke's Health Sys., Ltd.
| Decision Date | 10 February 2015 |
| Docket Number | No. 14–35173.,14–35173. |
| Citation | 778 F.3d 775 |
| Parties | SAINT ALPHONSUS MEDICAL CENTER–NAMPA INC.; Saint Alphonsus Health System Inc.; Saint Alphonsus Regional Medical Center, Inc.; Treasure Valley Hospital Limited Partnership ; Federal Trade Commission ; State of Idaho, Plaintiffs–Appellees, and Idaho Statesman Publishing, LLC ; The Associated Press; Idaho Press Club; Idaho Press–Tribune LLC; Lee Publications Inc., Intervenors, v. ST. LUKE'S HEALTH SYSTEM, LTD.; St. Luke's Regional Medical Center, Ltd.; Saltzer Medical Group, Defendants–Appellants. |
| Court | U.S. Court of Appeals — Ninth Circuit |
Brian K. Julian, Anderson, Julian & Hull LLP, Boise, ID, for Defendant–Appellant Saltzer Medical Group.
J. Walter Sinclair, Brian C. Wonderlich, Holland & Hart LLP, Boise, ID; Jack R. Bierig (argued), Scott D. Stein, Charles K. Schafer, Ben Keith, Tacy F. Flint, Sidley Austin LLP, Chicago, IL, for Defendants–Appellants St. Luke's Health System, Ltd. and St. Luke's Regional Medical Center, Ltd.Keely E. Duke, Duke Scanlan Hall PLLC, Boise, ID; David A. Ettinger (argued), Honigman Miller Schwartz & Cohn LLP, Detroit, MI, for Plaintiffs–Appellees Saint Alphonsus Medical Center–Nampa Inc.; Saint Alphonsus Health System Inc.; Saint Alphonsus Regional Medical Center, Inc.
Raymond D. Powers, Portia L. Rauer, Powers Tolman Farley, PLLC, Boise, ID, for Plaintiff–Appellee Treasure Valley Hospital Limited Partnership.
Lawrence G. Wasden, Attorney General, Brett T. DeLange, Deputy Attorney General, Boise, ID, for Plaintiff–Appellee The State of Idaho.
Deborah L. Feinstein, Director, Bureau of Competition, J. Thomas Greene, Peter C. Herrick, Henry C. Su, Jonathan E. Nuechterlein, General Counsel, David C. Shonka, Principal Deputy General Counsel, Joel Marcus (argued), Washington, D.C., for Plaintiff–Appellee The Federal Trade Commission.
Barbara D.A. Eyman, Eyman Associates, PC, Washington, D.C., for Amicus Curiae America's Essential Hospitals.
Lynn S. Carman, Natallia Mazina, Medicaid Defense Fund, San Anselmo, CA, for Amici Curiae International Center of Law & Economics and Medicaid Defense Fund.
Joe R. Whatley, Jr., Edith M. Kallas, Whatley Kallas, LLP, New York, NY, for Amici Curiae Economics Professors.
Donald M. Falk, Mayer Brown LLP, Palo Alto, CA; Robert E. Bloch, Michael B. Kimberly, Mayer Brown LLP, Washington, D.C., for Amicus Curiae The Association of Independent Doctors.
Joseph M. Miller, Michael S. Spector, America's Health Insurance Plans; Pierre H. Bergeron, Mark J. Botti, Squire Patton Boggs (US) LLP, Washington, D.C., for Amicus Curiae America's Health Insurance Plans.
Bruce L. Simon, Pearson, Simon & Warshaw, LLP, San Francisco, CA; Alexander R. Safyan, Pearson, Simon & Warshaw, LLP, Sherman Oaks, CA, for Amicus Curiae Catalyst for Payment Reform.
Kamala D. Harris, Attorney General of California, Mark Breckler, Chief Assistant Attorney General, Kathleen E. Foote, Senior Assistant Attorney General, Emilio Varanini, Deputy Attorney General, San Francisco, CA; Robert W. Ferguson, Attorney General of Washington, Darwin P. Roberts, Deputy Attorney General, Jonathan A. Mark, Chief, Antitrust Division, Stephen T. Fairchild, Assistant Attorney General, Seattle, WA; Kathleen G. Kane, Attorney General of Pennsylvania, James A. Donahue, III, Executive Deputy Attorney General, Tracy W. Wertz, Chief Deputy Attorney General, Jennifer A. Thomson, Senior Deputy Attorney General, Harrisburg, PA; George Jepsen, Attorney General of Connecticut, Hartford, CT; Joseph R. Biden III, Attorney General of Delaware, Wilmington, DE; Lisa Madigan, Attorney General of Illinois, Carolyn E. Shapiro, Solicitor General, Chicago, IL; Thomas J. Miller, Attorney General of Iowa, Des Moines, IA; Jack Conway, Attorney General of Kentucky, Frankfort, KY; Janet T. Mills, Attorney General of Maine, Augusta, ME; Douglas F. Gansler, Attorney General of Maryland, William F. Brockman, Deputy Solicitor General, Baltimore, MD; Jim Hood, Attorney General of Mississippi, Jackson, MS; Tim Fox, Attorney General of Montana, Helena, MT; Catherine Cortez Masto, Attorney General of Nevada, Carson City, NV; Gary K. King, Attorney General of New Mexico, Santa Fe, NM; Ellen F. Rosenblum, Attorney General of Oregon, Salem, OR; Robert E. Cooper, Jr., Attorney General of Tennessee, Nashville, TN, for Amicus Curiae
The States of California, Washington, Pennsylvania, Connecticut, Delaware, Illinois, Iowa, Kentucky, Maine, Maryland, Mississippi, Montana, Nevada, New Mexico, Oregon, and Tennessee.
Appeal from the United States District Court for the District of Idaho, B. Lynn Winmill, Chief District Judge, Presiding. D.C. Nos. 1:12–cv–00560–BLW, 1:13–cv–00116–BLW.
Before: RICHARD R. CLIFTON, MILAN D. SMITH, JR., and ANDREW D. HURWITZ, Circuit Judges.
This case arises out of the 2012 merger of two health care providers in Nampa, Idaho. The Federal Trade Commission (“FTC”) and the State of Idaho sued, alleging that the merger violated § 7 of the Clayton Act, 15 U.S.C. § 18, and state law; two local hospitals filed a similar complaint. Although the district court believed that the merger was intended to improve patient outcomes and might well do so, the judge nonetheless found that the merger violated § 7 and ordered divestiture.
As the district court recognized, the job before us is not to determine the optimal future shape of the country's health care system, but instead to determine whether this particular merger violates the Clayton Act. In light of the careful factual findings by the able district judge, we affirm the judgment below.
The largest adult primary care physician (“PCP”) provider in the Nampa market was Saltzer, which had sixteen PCPs.2 St. Luke's had eight PCPs and Saint Alphonsus nine. Several other PCPs had solo or small practices.
Saltzer had long had the goal of moving toward integrated patient care and risk-based reimbursement. After unsuccessfully attempting several informal affiliations, including one with St. Luke's, Saltzer sought a formal partnership with a large health care system.
In 2012, St. Luke's acquired Saltzer's assets and entered into a five-year professional service agreement (“PSA”) with the Saltzer physicians (the “merger” or the “acquisition”).3 Saltzer received a $9 million payment for goodwill. The initial PSA contained hortatory language about the parties' desire to move away from fee-for-service reimbursement, but included no provisions implementing that goal. An amended PSA, however, contained some quality-based incentives. The merger did not require Saltzer doctors to refer patients to the St. Luke's Boise hospital, nor did it require that Saltzer physicians use St. Luke's facilities for ancillary services.
In November 2012, the Private Hospitals filed a complaint in the District of Idaho seeking to enjoin the merger under Clayton Act § 7.4 The complaint alleged anticompetitive effects in the relevant markets for “primary care physician services,” “general acute-care inpatient services,” “general pediatric physician services,” and “outpatient surgery
services.” The district court denied a preliminary injunction, noting that: (1) the PSA did not require referrals to St. Luke's, minimizing any immediate harm to the Private Hospitals; (2) implementation of the PSA was to take place over time; and (3) the PSA provided a process for unwinding the transaction if it were declared illegal.
In March 2013, the FTC and the State of Idaho filed a complaint in the district court seeking to enjoin the merger pursuant to the Federal Trade Commission Act (“FTC Act”), the Clayton Act, and Idaho law.5 This complaint alleged anticompetitive effects only in the adult PCP market. The district court consolidated this case with the one filed by the Private Hospitals, and after a nineteen-day bench trial, found the merger prohibited by the Clayton Act and the Idaho Competition Act because of its anticompetitive effects on the Nampa adult PCP market.6
The district court expressly noted the troubled state of the U.S. health care system, found that St. Luke's and Saltzer genuinely intended to move toward a better health care system, and expressed its belief that the merger would “improve patient outcomes” if left intact. Nonetheless, the court found that the “huge market share” of the post-merger entity “creates a substantial risk of anticompetitive price increases” in the Nampa adult PCP market. Rejecting an argument by St. Luke's that anticipated post-merger efficiencies excused the potential anticompetitive price effects, the district court ordered divestiture. This appeal followed.
We review the district court's findings of fact for clear error and its conclusions of law de novo. Husain v. Olympic Airways, 316 F.3d 829, 835 (9th Cir.2002), aff'd, 540 U.S. 644, 124 S.Ct. 1221, 157 L.Ed.2d 1146 (2004). The question is whether a finding of fact is “clearly erroneous,” not whether there is a “compelling case” for an alternative finding. California v. Am. Stores Co., 872 F.2d 837, 842 (9th Cir.1989), rev'd on other grounds, 495 U.S. 271, 110 S.Ct. 1853, 109 L.Ed.2d 240 (1990). The district c...
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