9th Circuit Affirms Ruling in Favor of FTC in St. Luke’s Health System

The 9th Circuit has upheld a district court’s ruling order St. Luke’s Health System to unwind its purchase of the Saltzer Medical Group. The FTC’s complaint claimed that the transaction to acquire Saltzer Medical Group would result in undue concentration in the market for adult primary care physician services, and that the market power would allegedly allowSt. Luke’s Health System to obtain higher reimbursements from health plans, which may in turn pass the price increases to consumers and employers.

St. Luke’s Health System appealed the lower court’s decision arguing that the district court erred in assessing the likelihood of anticompetitive effects and in disregarding the transaction’s precompetitive benefits.St. Luke’s Health System also argued that the district court abused its discretion by ordering divesture without assessing the likely effect of that order on competition and consumer welfare. The FTC responded, arguing that the district court correctly found that Nampa is the relevant geographical market, that the acquisition would have anticompetitive effects, thatSt. Luke’s Health System did not demonstrate concrete, merger-specific efficiencies, and that the divestiture was properly ordered. The 9th Circuit agreed and upheld the district court’s decision, which ordered the immediate unwinding of the transaction.

The district court’s decision and 9th Circuit’s affirmance represents a significant win for the FTC. The victory represents the first successful challenge by the FTC to such a transaction in court. The FTC’s victory may signal trouble for other potential healthcare mergers. Those companies wishing to engage in healthcare mergers should no doubt pay attention to the 9th Circuit’s decision, and insure that those proposed mergers to not run afoul of anti-trust law and precedent.