St. Luke’s Health System Anti-Trust Action By Federal Trade Commission

The Federal Trade Commission (FTC) has over the years become a very familiar player in the hospital’s acquisitions and mergers. Since the passage of the health care reform law, there has existed a very great tension between FTC and the health care industry. The Patent Protection and Affordable Care Act has been encouraging hospitals to get into partnerships so as to reduce the healthcare costs, improve the efficiency, quality and care coordination. The FTC, however, is not in support of this. This has made most of the health care providers to feel like they are receiving two regulatory messages from their government.

There are several health care systems over the recent past that have faced serious anti-trust issues from FTC. One of this cases happened to St. Luke’s Health System which is based in Idaho. It is a non-profit organization composed of a six-hospital system. This hospital acquired Saltzer Medical Group which is located in the same state with St. Luke’s on Dec 2012. Saltzer is composed of a total of 44 physicians and thus was one of the oldest and largest independent medical groups that existed in the state. Under the signed deal, St. Luke’s assumed the power to be able to negotiate the health plan contracts on behalf of Saltzer as well as to establish the charges and rates of the services that Saltzer’s physicians provided(Kovacic, 2014).

In March however, the Idaho Attorney General Lawrence Wasden and Federal Trade Commission filed an anti-trust complaint which was meant to block St. Luke’s from the acquisition of the property. This was after the two, Federal Trade Commission and the Attorney General conducted an investigation on the plans for Saltzer acquisition as well as St. Luke’s practice acquisition for more than one year(Kovacic, 2014).

Despite this investigation, St. Luke’s went ahead to acquire Saltzer. It later on faced a lawsuit from two of its competitors; the Treasure Valley Hospital and Saint Aphonsus Health System. These two health care systems filed their complaint that the acquisition of Saltzer by St. Luke’s would mean that the hospital will have control over two-thirds of the health care providers in the area. FTC as well supported this complaint by saying that the transaction will mean that the combined entity will thus have control over 60% of the health care providers in the area(Leibenluft, 2015). They also came into a conclusion that this combination will give St. Luke’s an advantage of a greater bargaining power with the health care plan and thus the high cost of prizes will thus be passed on to the local employers and their employees as well.

However, when this issue is looked into closely, it is said that before FTC stepped in, private parties had already presented their complaints which meant a lot more in the public records than when FTC came in. It is also very evident that St. Luke’s went ahead to acquire Saltzer while at the same time it was facing a law suit from FTC as well as its competitors.  The last weird factor is that Federal Trade Commission came in so strongly three months down the line after the deal had been sealed(Dafny, 2014).

According to the Hart-Scott-Rodino Anti-Trust Improvement Act, all companies require to get an approval from FTC before any merging can be undertaken. Transactions that fall below a certain threshold however are considered as non-reportable. The threshold is set at $71 million. It is however subject to changes (Leibenluft, 2015).  The FTC interest therefore shows that organizations are ready to provide a traditional pre-merger precautions for most transactions.

After the case was looked into, there are several verdicts that came up. Judge Winmill, the judge presiding over the case, noted that St. Luke’s acquisition of Saltzer was aimed at improving the patient outcomes since Saltzer had so many qualified physicians. He also said that the acquisition would result to 80% of the physicians in the region. However, the number was not the greatest issue, the main issue is that it will have the greatest bargaining power over the available insurance plans. The judge also said that the upcoming program in St. Luke’s will allow the independent physicians to access the system and thus it would not be merger specific(Dafny, 2014).

St. Luke’s was also set to lose about $9 million to Saltzer as it was entitled to goodwill, and other intangibles which were part of the goodwill. The court rejected St. Luke’s proposal that suggested that the divestiture be dropped which was to act as a remedy in favor of the two health care systems that they conduct their negotiations separately with the health plans.

From St. Luke’s case, it is advised to always do more research on the rules and regulations that have to be followed before any merging can be done. This can prevent a lot of trouble and penalties that may occur as a result of this. First of all, it is advisable to know and understand the key laws that regulate the anti-trust activities. These include the Sherman Act which states that any contract that is written or applied that acts towards restraining trade may be a criminal act(Melvin,& Benson, 1989). This includes all the understandings and agreements between the competitors about the clients to serve, the prices to charge and much more that might affect the public’s ability to purchase the best products and services at a lower cost. The Clayton Act is also one of the acts which spells out the injunctive action that might be taken to punish an offender through use of fines, recoup losses and much more. The Robinson-Patman Act is also part of this law which prohibits price discrimination(Richard, 1976). The last Act is the Federal Trade Commission Act which prohibits unfair competition and works as a supplement to the provision of the other two acts. This act can only be enforced by Federal Trade Commission.

The consequences for the violation of these acts can lead to prison sentences and fines which might go up to millions of dollars which is dependent on the length of the violation and the impact it can cause. Anyone who has been injured by an anti-trust violation is also allowed to sue for damages and is allowed to recover three times the specific dollar as well as the attorney’s fees(Melvin, & Benson, 1989).

So as to avoid falling a victim of violation of this law there are several guidelines that I have researched that we need to adhere to before conducting any merging.

  • The pricing issue should not be discussed with the competitors. A meeting in which pricing will be discussed should be avoided at all costs. If by any chance it comes up in a meeting, one is advised to protest and leave immediately (Richard, 1976).
  • Never attempt to restrict any resale activity of any given customer or make an attempt to control the customer’s resale prize.
  • Avoid a discussion about the allocation of territories or markets of a customer with a competitor.
  • Avoid talking to the retailers about the prize they charge for your products or about how you make your sales to other customers (Melvin, & Benson, 1989).
  • Do not force a customer to buy a product or service exclusively from your company.
  • Never require a customer to buy a particular product so as to acquire another. In other words, avoid promotions of all goods and services.
  • Also do not make the purchases or sales conditional on the reciprocal purchases or sales
  • Never disparage a competitor’s product whether verbally or in writing. Do this only if you can prove your charges.
  • Do not charge different prizes of the same volume of products or services to different customers who may be in competition with each other (Richard, 1976).

Thus, when working towards the association activities that might include employees from the competing companies, one should ensure that:

  • The correct minutes of all meetings are kept
  • A competent council should be present for every meeting and that they should be able to provide advices when required.
  • No discussion of any subject matter that could be deemed unlawful should be held especially dealing with customer dealings and pricing.
  • The most important part of this all is that one should ensure that the trade association is formed in good faith and for the benefit of all its participants and the industry as well (Richard, 1976).

It is thus advisable to talk with the counsel about crafting of a book that will provide guidelines about the anti-trust compliance so that every employees understand what is illegal most specifically when dealing with the competitors(Melvin, & Benson, 1989). All sensitive issues which could lead to anti-trust investigations should be reviewed as it is clear that anti-trust issues are quite serious and can cause a great negative impact to the organization if not handled carefully. This is basically because Federal Trade Commission has of late shifted its major focus on the healthcare system and any wrong move is watched keenly.

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