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A federal judge has blocked a big health-care merger in Idaho on the grounds that it would likely increase prices for imaging, among other services—even though he said it also would likely improve patient outcomes.

U.S. District Judge B. Lynn Winmill in January blocked the merger of Boise-based St. Luke’s Health System, the state’s only nonprofit health system, and Nampa-based Saltzer Medical Group, the state’s largest independent physicians practice.

In his decision, according to the Idaho Statesman newspaper, Winmill wrote the following:

The acquisition was intended by St. Luke’s and Saltzer primarily to improve patient outcomes. The court is convinced that it would have that effect if left intact, and St. Luke’s is to be applauded for its efforts to improve the delivery of health care in the Treasure Valley.

St. Luke’s and Saltzer said the merger was crucial to their success in moving to a pay-for-performance payment structure.

However, Winmill concluded that it “appears highly likely that health care costs will rise as the combined entity obtains a dominant market position that will enable it to (1) negotiate higher reimbursement rates from health insurance plans that will be passed on to the consumer, and (2) raise rates for ancillary services (like X-rays) to the higher hospital-billing rates.”

St. Luke’s said it would appeal the ruling that the merger should be unraveled.

A few days after the ruling, Winmill—over the objections of lawyers from the hospital, insurance companies, and local employers—unsealed documents that supported and explained his reasoning. The lawyers said the documents contained trade secrets. Among the statements that St. Luke’s tried to keep sealed was this:

Consultant Peter LaFleur prepared an analysis at the direction of St. Luke’s showing how office/outpatient visits could be billed for higher amounts if the visit was hospital-based rather than Saltzer-based. The hospital-based billings were more than 60 percent higher.

And here’s another: “St. Luke’s own analysis projected that it could gain an extra $750,000 through hospital-based billing from Saltzer from commercial payers for lab work and $900,000 extra for diagnostic imaging.”

Nevertheless, the judge said the best result might be to leave the merger be and watch to see what happens to prices. “But [antitrust law] is in full force, and it must be enforced,” Winmill said. “The [law] does not give the court discretion to set it aside to conduct a health care experiment.”

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