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Saint Alphonsus Medical Center - Nampa Inc. v. St. Luke's Health System, Ltd.

United States Court of Appeals, Ninth Circuit

February 10, 2015

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

Argued and Submitted, Portland, Oregon November 19, 2014.

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Appeal from the United States District Court for the District of Idaho. D.C. Nos. 1:12-cv-00560-BLW, 1:13-cv-00116-BLW. B. Lynn Winmill, Chief District Judge, Presiding.

SUMMARY[*]

Clayton Act

The panel affirmed the district court's judgment in favor of the Federal Trade Commission, the State of Idaho, and two local hospitals, holding that the 2012 merger of two health care providers in Nampa, Idaho, violated § 7 of the Clayton Act.

Section 7 of the Clayton Act bars mergers whose effect " may be substantially to lessen competition, or to tend to create a monopoly." The plaintiff must first establish a prima facie case that a merger is anticompetitive, and the burden then shifts to the defendant to rebut the prima facie case.

The panel held that the district court did not clearly err in determining that Nampa, Idaho, was the relevant geographic market. The panel also held that the district court did not clearly err in its factual findings that the plaintiffs established a prima facie case that the merger will probably lead to anticompetitive effects in that market. The panel further held that a defendant can rebut a prima facie case with evidence that the proposed merger will create a more efficient combined entity and thus increase competition. The panel held that the district court did not clearly err in concluding that the defendant did not rebut the plaintiffs' prima facie case where the defendant did not demonstrate that efficiencies resulting from the merger would have a positive effect on competition. Finally, the panel held that the district court did not abuse its discretion in choosing a divestiture remedy.

Brian K. Julian, Anderson, Julian & Hull LLP, Boise, Idaho, for Defendant-Appellant Saltzer Medical Group.

J. Walter Sinclair, Brian C. Wonderlich, Holland & Hart LLP, Boise, Idaho; Jack R. Bierig (argued), Scott D. Stein, Charles K. Schafer, Ben Keith, Tacy F. Flint, Sidley Austin LLP, Chicago, Illinois, 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, Idaho; David A. Ettinger (argued), Honigman Miller Schwartz & Cohn LLP, Detroit, Michigan, 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, Idaho, for Plaintiff-Appellee Treasure Valley Hospital Limited Partnership.

Lawrence G. Wasden, Attorney General, Brett T. DeLange, Deputy Attorney General, Deborah L. Feinstein, Director, Bureau of Competition, J. Thomas Greene, Peter C. Herrick, Henry C. Su, Boise, Idaho; Jonathan E. Nuechterlein, General Counsel, David C. Shonka, Principal Deputy General Counsel, Joel Marcus (argued), Washington, D.C., for Plaintiffs-Appellees The Federal Trade Commission and The State of Idaho.

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, California, for Amici Curiae International Center of Law & Economics and Medicaid Defense Fund.

Joe R. Whatley, Jr., Edith M. Kallas, Whatley Kallas, LLP, New York, New York, for Amici Curiae Economics Professors.

Donald M. Falk, Mayer Brown LLP, Palo Alto, California; 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 (U.S.) LLP, Washington, D.C., for Amicus Curiae America's Health Insurance Plans.

Bruce L. Simon, Pearson, Simon & Warshaw, LLP, San Francisco, California; Alexander R. Safyan, Pearson, Simon & Warshaw, LLP, Sherman Oaks, California, 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, California; 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, Washington; 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, Pennsylvania; George Jepsen, Attorney General of Connecticut, Hartford, Connecticut; Joseph R. Biden III, Attorney General of Delaware, Wilmington, Delaware; Lisa Madigan, Attorney General of Illinois, Carolyn E. Shapiro, Solicitor General, Chicago, Illinois; Thomas J. Miller, Attorney General of Iowa, Des Moines, Iowa; Jack Conway, Attorney General of Kentucky, Frankfort, Kentucky; Janet T. Mills, Attorney General of Maine, Augusta, Maine; Douglas F. Gansler, Attorney General of Maryland, William F. Brockman, Deputy Solicitor General, Baltimore, Maryland; Jim Hood, Attorney General of Mississippi, Jackson, Mississippi; Tim Fox, Attorney General of Montana, Helena, Montana; Catherine Cortez Masto, Attorney General of Nevada, Carson City, Nevada; Gary K. King, Attorney General of New Mexico, Santa Fe, New Mexico; Ellen F. Rosenblum, Attorney General of Oregon, Salem, Oregon; Robert E. Cooper, Jr., Attorney General of Tennessee, Nashville, Tennessee, for Amicus Curiae The States of California, Washington, Pennsylvania, Connecticut, Delaware, Illinois, Iowa, Kentucky, Maine, Maryland, Mississippi, Montana, Nevada, New Mexico, Oregon, and Tennessee.

Before: Richard R. Clifton, Milan D. Smith, Jr., and Andrew D. Hurwitz, Circuit Judges.

OPINION

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HURWITZ, Circuit Judge:

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.

I. Background

A. The Health Care Market in Nampa, Idaho

Nampa, the second-largest city in Idaho, is some twenty miles west of Boise and has a population of approximately 85,000. Before the merger at issue, St. Luke's Health Systems, Ltd. (" St. Luke's" ), an Idaho-based, not-for-profit health care system, operated an emergency clinic in the city. Saltzer Medical Group, P.A. (" Saltzer" ), the largest independent multi-specialty physician group in Idaho, had thirty-four physicians practicing at its offices in Nampa. The only hospital in Nampa was operated by Saint Alphonsus Health System, Inc. (" Saint Alphonsus" ), a part of the multistate Trinity Health system. Saint Alphonsus and Treasure Valley Hospital Limited Partnership (" TVH" ) jointly operated an outpatient surgery center.[1]

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 ...


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