To Sell, or Not to Sell? Antitrust Laws Need to Be Taken into Consideration

In 2014, the Pennsylvania Medical Society (PAMED) reported a federal district court decision that highlighted an important legal consideration for hospitals looking to acquire medical practices and physicians looking to sell to them — the arrangement could go against state and federal antitrust laws.

The decision involved an antitrust challenge to the acquisition of an Idaho physician practice – Saltzer Medical Group – by the St. Luke’s Health System. The district court ruled that the acquisition violated the antitrust laws.

A key finding was that the acquisition resulted in St. Luke’s having a dominant position in its market (with 80 percent of the primary care physicians), which was likely to increase health care costs.

An important take away from the decision is that the mere fact that integration will improve clinical outcomes and efficiencies does not bestow antitrust immunity. The court agreed that the acquisition of the medical practice would have those positive benefits, but observed that there were other ways —short of an outright acquisition — to achieve the same effect.

On Feb. 10, 2015, the Ninth Circuit Court of Appeals affirmed that decision and the district court’s order requiring the health system to divest the medical practice. 

Stayed tuned for further updates the boundaries between hospital and physician integration that results in substantial market power.

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