Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca9-14-35173/USCOURTS-ca9-14-35173-0/pdf.json

Nature of Suit Code: 410
Nature of Suit: Antitrust
Cause of Action: 

---

FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

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.

No. 14-35173

D.C. Nos.

1:12-cv-00560-BLW

1:13-cv-00116-BLW

OPINION

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 1 of 32
2 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

Appeal from the United States District Court

for the District of Idaho

B. Lynn Winmill, Chief District Judge, Presiding

Argued and Submitted

November 19, 2014—Portland, Oregon

Filed February 10, 2015

Before: Richard R. Clifton, Milan D. Smith, Jr.,

and Andrew D. Hurwitz, Circuit Judges.

Opinion by Judge Hurwitz

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 2 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 3

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

* This summary constitutes no part of the opinion of the court. It has

been prepared by court staff for the convenience of the reader.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 3 of 32
4 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

competition. Finally, the panel held that the district court did

not abuse its discretion in choosing a divestiture remedy.

COUNSEL

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,

HenryC. Su, Boise, Idaho; Jonathan E. Nuechterlein, General

Counsel, David C. Shonka, Principal Deputy General

Counsel, Joel Marcus (argued), Washington, D.C., for

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 4 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 5

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 (US) 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.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 5 of 32
6 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

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, DeputySolicitor

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.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 6 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 7

OPINION

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

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 7 of 32
8 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

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 primarycare 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

other PCPs had solo or small practices.

B. The Challenged Acquisition

Saltzer had long had the goal of moving toward integrated

patient care and risk-based reimbursement. After

unsuccessfully attempting several informal affiliations,

including one with St. Luke’s, Saltzer sought a formal

partnership with a large health care system.

In 2012, St. Luke’s acquired Saltzer’s assets and entered

into a five-year professional service agreement (“PSA”) with

the Saltzer physicians (the “merger” or the “acquisition”).3

Saltzer received a $9 million payment for goodwill. The

initial PSA contained hortatory language about the parties’

1 For simplicity, this opinion sometimes refers to St. Luke’s and Saltzer

collectively as “St. Luke’s,” and Saint Alphonsus and TVH collectively

as the “Private Hospitals.”

2 The district court found that “[a]dult PCP services include physician

services provided to commercially insured patients aged 18 and over by

physicians practicing internal medicine, family practice, and general

practice.”

3 The parties and the district court regarded the PSA as the functional

equivalent of an employment agreement, and we assume the same.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 8 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 9

desire to move away from fee-for-service reimbursement, but

included no provisions implementing that goal. An amended

PSA, however, contained some quality-based incentives. The

merger did not require Saltzer doctors to refer patients to the

St. Luke’s Boise hospital, nor did it require that Saltzer

physicians use St. Luke’s facilities for ancillary services.

C. Procedural History

In November 2012, the Private Hospitals filed a

complaint in the District of Idaho seeking to enjoin the

merger under Clayton Act § 7.4 The complaint alleged

anticompetitive effects in the relevant markets for “primary

care physician services,” “general acute-care inpatient

services,” “general pediatric physician services,” and

“outpatient surgery services.” The district court denied a

preliminary injunction, noting that: (1) the PSA did not

require referrals to St. Luke’s, minimizing any immediate

harm to the Private Hospitals; (2) implementation of the PSA

was to take place over time; and (3) the PSA provided a

process for unwinding the transaction if it were declared

illegal.

In March 2013, the FTC and the State of Idaho filed a

complaint in the district court seeking to enjoin the merger

pursuant to the Federal Trade Commission Act (“FTC Act”),

the Clayton Act, and Idaho law.5 This complaint alleged

 

4

 The Private Hospitals filed an amended complaint in January 2013.

5 The Idaho Competition Act is “construed in harmony” with federal

antitrust law, Idaho Code §§ 48-102(3), -106, and the district court held

that the antitrust analysis is the same for each. The parties do not contend

otherwise.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 9 of 32
10 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

anticompetitive effects only in the adult PCP market. The

district court consolidated this case with the one filed by the

Private Hospitals, and after a nineteen-day bench trial, found

the merger prohibited by the Clayton Act and the Idaho

Competition Act because of its anticompetitive effects on the

Nampa adult PCP market.6

The district court expressly noted the troubled state of the

U.S. health care system, found that St. Luke’s and Saltzer

genuinely intended to move toward a better health care

system, and expressed its belief that the merger would

“improve patient outcomes” if left intact. Nonetheless, the

court found that the “huge market share” of the post-merger

entity “creates a substantial risk of anticompetitive price

increases” in the Nampa adult PCP market. Rejecting an

argument by St. Luke’s that anticipated post-merger

efficiencies excused the potential anticompetitive price

effects, the district court ordered divestiture. This appeal

followed.

II. Standard of Review

We review the district court’s findings of fact for clear

error and its conclusions of law de novo. Husain v. Olympic

Airways, 316 F.3d 829, 835 (9th Cir. 2002), aff’d, 540 U.S.

644 (2004). The question is whether a finding of fact is

“clearly erroneous,” not whether there is a “compelling case”

for an alternative finding. California v. Am. Stores Co.,

872 F.2d 837, 842 (9th Cir. 1989), rev’d on other grounds,

495 U.S. 271 (1990). The district court’s choice of remedy

is reviewed for abuse of discretion. Theme Promotions, Inc.

6 The court therefore did not address the Private Hospitals’ contentions

with respect to the other product markets.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 10 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 11

v. News Am. Mktg. FSI, 546 F.3d 991, 1000 (9th Cir. 2008)

(citing United States v. Alisal Water Corp., 431 F.3d 643, 654

(9th Cir. 2005)).

III. The Clayton Act § 7 Analysis

A. Overview of the Clayton Act

The great Yankee catcher Yogi Berra is reputed (likely

apocryphally) to have said that it’s “tough to make

predictions, especially about the future.” The Perils of

Prediction, Economist, June 2, 2007, at 96.7 Yet that is

precisely what this case requires. Because § 7 of the Clayton

Act bars mergers whose effect “may be substantially to lessen

competition, or to tend to create a monopoly,” 15 U.S.C.

§ 18, judicial analysis necessarily focuses on “probabilities,

not certainties,” Brown Shoe Co. v. United States, 370 U.S.

294, 323 (1962). This “requires not merely an appraisal of

the immediate impact of the merger upon competition, but a

prediction of its impact upon competitive conditions in the

future; this is what is meant when it is said that the amended

§ 7 was intended to arrest anticompetitive tendencies in their

incipiency.” United States v. Phila. Nat’l Bank, 374 U.S.

321, 362 (1963) (internal quotation marks omitted).

Section 7 claims are typically assessed under a “burdenshifting framework.” Chi. Bridge & Iron Co. v. FTC,

534 F.3d 410, 423 (5th Cir. 2008). The plaintiff must first

7 This quotation is not included in the definitive book of Berra

quotations, see Yogi Berra, The Yogi Book: “I Really Didn’t Say

Everything I Said!” (1998), and its provenance is at best unclear, see, e.g.,

The Yale Book of Quotations 92 (Fred R. Shapiro ed., 2006) (attributing

a variant to Niels Bohr, but noting that the exact authorship is disputed).

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 11 of 32
12 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

establish a prima facie case that a merger is anticompetitive. 

See Olin Corp. v. FTC, 986 F.2d 1295, 1305 (9th Cir. 1993)

(discussing how plaintiff’s establishment of a prima facie

case on statistical evidence was the first step in the analysis). 

The burden then shifts to the defendant to rebut the prima

facie case. See id.; Am. Stores, 872 F.2d at 842 (citing United

States v. Marine Bancorporation, Inc., 418 U.S. 602, 631

(1974)). “[I]f the [defendant] successfully rebuts the prima

facie case, the burden of production shifts back to the

Government and merges with the ultimate burden of

persuasion, which is incumbent on the Government at all

times.” Chi. Bridge & Iron, 534 F.3d at 423.8

B. The Relevant Market

“Determination of the relevant product and geographic

markets is a necessary predicate to deciding whether a merger

contravenes the Clayton Act.” Marine Bancorporation,

418 U.S. at 618 (internal quotation marks omitted). 

Definition of the relevant market is a factual question

“dependent upon the special characteristics of the industry

involved and we will not disturb such findings unless clearly

erroneous.” Twin City Sportservice, Inc. v. Charles O. Finley

& Co., 676 F.2d 1291, 1299 (9th Cir. 1982). Although the

8 The application of this framework in the Ninth Circuit is not rigid. 

Thus, in determining whether the prima facie case has been rebutted, a

district court may consider evidence submitted by the plaintiff in the casein-chief. See Olin, 986 F.3d at 1305 (finding no burden-shifting error

because the FTC had determined that the rebuttal evidence was

insufficient to overcome the prima facie showing); see also Chi. Bridge

&Iron, 534 F.3d at 424–25 (stating that Olin “allows [a court] to preserve

the prima facie presumption if the [defendant] . . . fails to satisfy the

burden of production in light of contrary evidence in the prima facie

case”).

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 12 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 13

parties agree that the relevant product market in this case is

adult PCPs, St. Luke’s vigorously disputes the district court’s

determination that Nampa is the relevant geographic market. 

We find no clear error in that factual finding.

The relevant geographic market is the “area of effective

competition where buyers can turn for alternate sources of

supply.” Morgan, Strand, Wheeler & Biggs v. Radiology,

Ltd., 924 F.2d 1484, 1490 (9th Cir. 1991) (alteration omitted)

(quoting Oltz v. St. Peter’s Cmty. Hosp., 861 F.2d 1440, 1446

(9th Cir. 1988)) (internal quotation marks omitted). Put

differently, “a market is the group of sellers or producers who

have the actual or potential ability to deprive each other of

significant levels of business.” Rebel Oil Co. v. Atl. Richfield

Co., 51 F.3d 1421, 1434 (9th Cir. 1995) (quoting Thurman

Indus., Inc. v. Pay ‘N Pak Stores, Inc., 875 F.2d 1369, 1374

(9th Cir. 1989)) (internal quotation marks omitted). The

plaintiff has the burden of establishing the relevant

geographic market. See United States v. Conn. Nat’l Bank,

418 U.S. 656, 669–70 (1974).

A common method to determine the relevant geographic

market, and the one used by the district court, is to find

whether a hypothetical monopolist could impose a “small but

significant nontransitory increase in price” (“SSNIP”) in the

proposed market. See Theme Promotions, 546 F.3d at 1002;

see also In re Se. Milk Antitrust Litig., 739 F.3d 262, 277–78

(6th Cir. 2014) (describing the relevant geographic market as

one in which “buyers . . . respond to a SSNIP by purchasing

regardless of the increase”); U.S. Dep’t of Justice & FTC,

Horizontal Merger Guidelines (“Merger Guidelines”) § 4

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 13 of 32
14 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

(2010).9If enough consumers would respond to a SSNIP by

purchasing the product from outside the proposed geographic

market, making the SSNIP unprofitable, the proposed market

definition is too narrow. See Theme Promotions, 546 F.3d at

1002.

Market definition thus perforce focuses on the anticipated

behavior of buyers and sellers. See, e.g., Rebel Oil, 51 F.3d

at 1430, 1434–35. In the health care industry, insurance

companies effectively act both as buyers and sellers. See

FTC v. Freeman Hosp., 69 F.3d 260, 270 n.14 (8th Cir.

1995); Gregory Vistnes, Hospitals, Mergers, and Two-Stage

Competition, 67 Antitrust L.J. 671, 672 (2000). Noting that

“the vast majority of health care consumers are not direct

purchasers of health care—the consumers purchase health

insurance and the insurance companies negotiate directlywith

the providers,” the district court correctly focused on the

“likely response of insurers to a hypothetical demand by all

the PCPs in a particular market for a [SSNIP].”10

The district court found that a hypothetical Nampa PCP

monopolist could profitably impose a SSNIP on insurers. 

9 Although the Merger Guidelines are “not binding on the courts,” Olin,

986 F.2d at 1300, they “are often used as persuasive authority,” Chi.

Bridge & Iron, 534 F.3d at 431 n.11.

10 This “two-stage model” of health care competition is “the accepted

model.” John J. Miles, 1 Health Care & Antitrust L. § 1:5 (2014). In the

first stage, providers compete for inclusion in insurance plans. See

Vistnes, supra, at 674. In the second stage, providers seek to attract

patients enrolled in the plans. See id. at 681–82. Because patients are

“largely insensitive” to price, the second stage “takes place primarily over

non-price dimensions.” Id. at 682. Thus, antitrust analysis focuses on the

first stage. Id. at 692.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 14 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 15

Citing testimonythat Nampa residents “stronglyprefer access

to local PCPs,” the court found that “commercial health plans

need to include Nampa PCPs in their networks to offer a

competitive product.” “Given this dynamic—that health

plans must offer Nampa Adult PCP services to Nampa

residents to effectively compete—Nampa PCPs could band

together and successfully demand a [SSNIP] (or

reimbursement increase) from health plans.”

St. Luke’s argues that the district court erred by

considering only the current behavior of Nampa consumers,

not their likely response to a SSNIP. St. Luke’s is of course

correct that geographic market definition involves

prospective analysis—it predicts consumer response to a

hypothetical price increase. See FTC v. Tenet Health Care

Corp., 186 F.3d 1045, 1053–54 (8th Cir. 1999). But that is

precisely what the district court did. The court not only

examined present Nampa consumer behavior, but also

concluded that it would not change in the event of a SSNIP.

This determination was supported by the record. 

Evidence was presented that insurers generally need local

PCPs to market a health care plan, and that this is true in

particular in the Nampa market. For example, Blue Cross of

Idaho has PCPs in every zip code in which it has customers,

and the executive director of the Idaho Physicians Network

testified that it could not market a health care network in

Nampa that did not include Nampa PCPs. Evidence also

indicated that consumers would not change their behavior in

the event of a SSNIP. Experts testified that because health

care consumers only pay a small percentage of health care

costs out of pocket, the impact of a SSNIP likely would not

register. Similarly, there was testimony that consumers

choose physicians on factors other than price. The court was

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 15 of 32
16 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

unconvinced by evidence that insurers could defend against

a SSNIP by steering consumers to non-Nampa PCPs.11

For similar reasons, there also was no clear error in the

district court’s determination that evidence that one-third of

Nampa residents travel to Boise for PCPs did not prove that

a significant number of other residents would so travel in the

event of a SSNIP. Those who traveled generally went to

PCPs near their Boise places of employment. Thus, the court

reasonably found this statistic not determinative of whether

other Nampa residents would be willing to travel.

C. The Plaintiffs’ Case

Once the relevant geographic market is determined, a

prima facie case is established if the plaintiff proves that the

merger will probably lead to anticompetitive effects in that

market. See Olin, 986 F.2d at 1305; see also Chi. Bridge &

Iron, 534 F.3d at 423. A prima facie case can be established

simply by showing high market share. United States v. Syufy

Enters., 903 F.2d 659, 664 n.6 (9th Cir. 1990); see also FTC

v. H.J. Heinz Co., 246 F.3d 708, 716 (D.C. Cir. 2001). 

However, “statistics concerning market share and

concentration, while of great significance, [a]re not

11 Extensive evidence was offered about Micron, a Boise employer that

created a health care plan including financial incentives for employees to

use certain providers; the plan caused a substantial portion of Micron

employees residing in Nampa to switch to non-Nampa PCPs. St. Luke’s

argues that this evidence proved that Nampa consumers would respond to

a SSNIP. But the district court did not clearly err in finding the Micron

example unpersuasive. Micron’s cost differentials were much higher than

a SSNIP, Boise PCPs were close to work for Micron’s employees, and it

was unclear whether other employers would be willing or able to replicate

Micron’s program.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 16 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 17

conclusive indicators of anticompetitive effects . . . .” United

States v. Gen. Dynamics Corp., 415 U.S. 486, 498 (1974); see

also FTC v. Warner Commc’ns Inc., 742 F.2d 1156, 1163 n.1

(9th Cir. 1984). Thus, plaintiffs in § 7 cases generally present

other evidence as part of the prima facie case. See Gen.

Dynamics, 415 U.S. at 498 (“[O]nly a further examination of

the particular market—its structure, history and probable

future—can provide the appropriate setting for judging the

probable anticompetitive effect of the merger.” (quoting

Brown Shoe, 370 U.S. at 322 n.38)); see also Chi. Bridge &

Iron, 534 F.3d at 431 (noting that market share data was “just

one element in the Government’s strong prima facie case”);

Carl Shapiro, The 2010 Horizontal Merger Guidelines: From

Hedgehog to Fox in Forty Years, 77 Antitrust L.J. 49, 50–60

(2010) (noting the trend in merger enforcement to consider

factors in addition to market share).

The district court held that the plaintiffs established a

prima facie case because of the post-merger entity’s:

(1) market share; (2) ability to negotiate higher PCP

reimbursement rates with insurers; and (3) ability to “charge

more [ancillary] services at the higher hospital billing rates.” 

The court also found that “entry into the market has been very

difficult and would not be timely to counteract the

anticompetitive effects of the Acquisition.” St. Luke’s does

not challenge the barriers-to-entry finding; we review the

others in turn for clear error.

1. Market Share

A commonly used metric for determining market share is

the Herfindahl-Hirschman Index (“HHI”). See ProMedica

Health Sys., Inc. v. FTC, 749 F.3d 559, 568 (6th Cir. 2014);

H.J. Heinz, 246 F.3d at 716. HHI is “calculated by summing

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 17 of 32
18 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

the squares of the individual firms’ market shares,” which

“gives proportionately greater weight to the larger market

shares.” Merger Guidelines § 5.3. The analysis “consider[s]

both the post-merger level of the HHI and the increase in the

HHI resulting from the merger.” Id. The Merger Guidelines

classify markets as (1) unconcentrated (HHI below 1500);

(2) moderately concentrated (HHI between 1500 and 2500);

or (3) highly concentrated (HHI above 2500). Id. Mergers

that increase the HHI more than 200 points and result in

highly concentrated markets are “presumed to be likely to

enhance market power.” Id. “Sufficiently large HHI figures

establish the FTC’s prima facie case that a merger is anticompetitive.” H.J. Heinz, 246 F.3d at 716.

The district court calculated the post-merger HHI in the

Nampa PCP market as 6,219, and the increase as 1,607. St.

Luke’s does not challenge these findings. As the district

court correctly noted, these HHI numbers “are well above the

thresholds for a presumptively anticompetitive merger (more

than double and seven times their respective thresholds,

respectively).” See ProMedica, 749 F.3d at 568 (noting that

a merger with similar HHI numbers “blew through those

barriers in spectacular fashion”).

2. PCP Reimbursements

The district court also found that St. Luke’s would likely

use its post-merger power to negotiate higher reimbursement

rates from insurers for PCP services. Recognizing that the

§ 7 inquiry is based on a prediction of future actions, see

Phila. Nat’l Bank, 374 U.S. at 362, this finding was not

clearly erroneous.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 18 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 19

Because St. Luke’s and Saltzer had been each other’s

closest substitutes in Nampa, the district court found the

acquisition limited the ability of insurers to negotiate with the

merged entity. Pre-acquisition internal correspondence

indicated that the merged companies would use this increased

bargaining power to raise prices. An email between St.

Luke’s executives discussed “pressur[ing] payors for new

directed agreements,” and an exchange between Saltzer

executives stated that “[i]f our negotiations w/ Luke’s go to

fruition,” then “the clout of the entire network” could be used

to negotiate favorable terms with insurers. The court also

examined a previous acquisition by St. Luke’s in Twin Falls,

Idaho, and found that St. Luke’s used its leverage in that

instance to force insurers to “concede to their pricing

proposal.”

3. Ancillary Services

The district court’s finding that St. Luke’s would raise

prices in the hospital-based ancillary services market12is

more problematic. The court found that St. Luke’s would

“exercise its enhanced bargaining leverage from the

Acquisition to charge more services at the higher hospitalbased billing rates.” Because insurers and providers typically

negotiate for all services as part of the same contract, the

district court found that St. Luke’s increased leverage with

12 Ancillary services, such as x-rays and diagnostic testing, are

sometimes performed by doctors in conjunction with PCP examinations. 

Before the merger, Saltzer provided many ancillary services at its

physicians’ offices. Insurance companies and Medicare often offer higher

reimbursements for ancillary services performed at a hospital-based

outpatient facility.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 19 of 32
20 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

respect to PCP services would allow it to demand higher fees

for ancillary services.

The problem with this conclusion is that the district court

made no findings about St. Luke’s’ market power in the

ancillary services market. Absent such a finding, it is

difficult to conclude that the merged entity could easily

demand anticompetitive prices for such services. Perhaps the

court was suggesting that St. Luke’s would engage in tying,

“a device used by a seller with market power in one product

market to extend its market power to a distinct product

market.” Cascade Health Solutions v. PeaceHealth, 515 F.3d

883, 912 (9th Cir. 2008). Although various antitrust statutes,

including Sherman Act §§ 1 and 2, Clayton Act § 3, and FTC

Act § 5, address tying, Clayton Act § 7 does not expressly

prohibit the practice. A leading antitrust treatise cautions

against condemning a merger for potential tying effects as

“superfluous and overdeterrent.” Phillip Areeda & Herbert

Hovenkamp, Antitrust Law: An Analysis of Antitrust

Principles and Their Application (“Areeda”) ¶ 1144a (2010).

Wholly aside from these conceptual difficulties, the

factual underpinnings of the district court’s conclusion are

suspect. The documents cited by the district court merely

state that St. Luke’s hopes to increase revenue from ancillary

services, not that it plans to charge higher prices. An increase

in revenue could occur in a variety of ways not involving

increased prices, such as increased Medicare payments or

increased volume from Saltzer referrals. The district court

did not find that Saltzer physicians would inappropriately

label in-house services as hospital-based, or that they would

force patients to travel to the St. Luke’s hospital in Boise for

services that could be provided in-house in Nampa. And the

court did not identify any past actions that would allow it to

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 20 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 21

predict that St. Luke’s would act anticompetitively in the

future in the ancillary services market. Indeed, in postmerger negotiations with Blue Shield, St. Luke’s did not do

so. We thus find that the ancillary services finding is not

supported by the record.

4. The Prima Facie Case

But absent the ancillary services finding, the district

court’s conclusion that a prima facie case was established is

amply supported by the record. “Section 7 does not require

proof that a merger or other acquisition has caused higher

prices in the affected market. All that is necessary is that the

merger create an appreciable danger of such consequences in

the future.” Hosp. Corp. of Am. v. FTC, 807 F.2d 1381, 1389

(7th Cir. 1986).

The extremely high HHI on its own establishes the prima

facie case. See H.J. Heinz, 246 F.3d at 716; United States v.

Baker Hughes, Inc., 908 F.2d 981, 982–83 & n.3 (D.C. Cir.

1990). In addition, the court found that statements and past

actions by the merging parties made it likely that St. Luke’s

would raise reimbursement rates in a highly concentrated

market. See Hosp. Corp., 807 F.2d at 1388–89 (expressing

concern that a history of cooperation among hospitals could

lead to collusion when a merger caused the market to become

more concentrated). And, the court’s uncontested finding of

high entry barriers “eliminates the possibility that the reduced

competition caused by the merger will be ameliorated by new

competition from outsiders and further strengthens the FTC’s

case.” H.J. Heinz, 246 F.3d at 717.

The facts found by the district court are similar to those

in other cases in which a prima facie violation of § 7 was

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 21 of 32
22 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

established. See, e.g., Chi. Bridge & Iron, 534 F.3d at

431–32 (high HHI, limited rivals, high entry barriers, and

customer perception); Lucas Auto. Eng’g, Inc. v.

Bridgestone/Firestone, Inc., 140 F.3d 1228, 1236–37 (9th

Cir. 1998) (reversing summary judgment for defendant

because undisputed facts showed high market share and

“insurmountable barriers to entry”); FTC v. Univ. Health,

Inc., 938 F.2d 1206, 1219–20 & n.27 (11th Cir. 1991) (high

market concentration, high entry barriers, and evidence that

defendants intended to eliminate competition with the

merger); Am. Stores, 872 F.2d at 841–43 (high market share,

and insufficient evidence of low entry barriers to rebut the

prima facie case). The district court did not clearly err in its

factual findings, which adequately support its ultimate

conclusion that the plaintiffs established “a prima facie case

that the Acquisition is anti-competitive.”

D. The Rebuttal Case

Because the plaintiffs established a prima facie case, the

burden shifted to St. Luke’s to “cast doubt on the accuracy of

the Government’s evidence as predictive of future anticompetitive effects.” Chi. Bridge & Iron, 534 F.3d at 423. 

The rebuttal evidence focused on the alleged procompetitive

effects of the merger, particularly the contention that the

merger would allow St. Luke’s to move toward integrated

care and risk-based reimbursement.13

13 The district court found that a core reason for high health care costs

is the prevalent fee-for-service reimbursement model, based on the

apparently uncontested opinions of expert witnesses. Experts have

recommended moving toward integrated care and risk-based

reimbursement. “In an integrated delivery system, [PCPs] and specialty

physicians work as a team, with PCPs managing patient care and specialty

physicians consulting and providing care as needed.” Risk-based

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 22 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 23

1. The Post-Merger Efficiencies Defense

The Supreme Court has never expressly approved an

efficiencies defense to a § 7 claim. See H.J. Heinz, 246 F.3d

at 720. Indeed, Brown Shoe cast doubt on the defense:

Of course, some of the results of large

integrated or chain operations are beneficial to

consumers. Their expansion is not rendered

unlawful by the mere fact that small

independent stores may be adversely affected.

It is competition, not competitors, which the

Act protects. But we cannot fail to recognize

Congress’ desire to promote competition

through the protection of viable, small, locally

owned business. Congress appreciated that

occasional higher costs and prices might

result from the maintenance of fragmented

industries and markets. It resolved these

competing considerations in favor of

decentralization. We must give effect to that

decision.

370 U.S. at 344. Similarly, in FTC v. Procter & Gamble Co.,

the Court stated that “[p]ossible economies cannot be used as

a defense to illegality. Congress was aware that some

mergers which lessen competition may also result in

reimbursement (also known as capitation) means that “providers receive

reimbursement from insurers in the form of a set amount for each patient

rather than a payment for each service rendered. The set amount is based

on the average expected health care utilization for the patients given such

factors as their age and medical history.” “Capitation motivates providers

to consider the costs of treatment as they will share in the savings if they

can keep actual costs below the set amount they receive.”

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 23 of 32
24 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

economies but it struck the balance in favor of protecting

competition.” 386 U.S. 568, 580 (1967).

Notwithstanding the Supreme Court’s statements, four of

our sister circuits (the Sixth, D.C., Eighth, and Eleventh) have

suggested that proof of post-merger efficiencies could rebut

a Clayton Act § 7 prima facie case. See ProMedica, 749 F.3d

at 571; H.J. Heinz, 246 F.3d at 720–22; Tenet, 186 F.3d at

1054–55; Univ. Health, 938 F.2d at 1222–24.14 The FTC has

also cautiously recognized the defense, noting that although

competition ordinarily spurs firms to achieve efficiencies

internally, “a primary benefit of mergers to the economy is

their potential to generate significant efficiencies and thus

enhance the merged firm’s ability and incentive to compete,

which may result in lower prices, improved quality, enhanced

service, or new products.” Merger Guidelines § 10; see also

Oliver E. Williamson, Economies as an Antitrust Defense

Revisited, 125 U. Pa. L. Rev. 699, 699 (1977)

(“Sometimes . . . a merger will . . . result in real increases in

efficiency that reduce the average cost of production of the

combined entity below that of the two merging firms.”). 

However, none of the reported appellate decisions have

actually held that a § 7 defendant has rebutted a prima facie

case with an efficiencies defense; thus, even in those circuits

that recognize it, the parameters of the defense remain

imprecise.

14 Some courts have attempted to explain why the Supreme Court cases

do not recognize an efficiencies defense, see, e.g., H.J. Heinz, 246 F.3d at

720 n.18 (arguing that the “possible economies” language in Proctor &

Gamble does not ban an actual efficiencies defense), but others have

simply stated that the defense exists without addressing the language in

Brown Shoe and its progeny, see, e.g., ProMedica, 749 F.3d at 571.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 24 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 25

The status of the defense in this circuit remains uncertain. 

A quarter of a century ago, we rejected an efficiencies

defense in RSR Corp. v. FTC, 602 F.2d 1317, 1325 (9th Cir.

1979). RSR, however, involved an argument that the merger

would allow the defendant to compete more efficiently

outside the relevant market. Id. More recent cases focus on

whether efficiencies in the relevant market negate the

anticompetitive effect of the merger in that market. See Univ.

Health, 938 F.2d at 1222. Even after RSR, several district

courts in this circuit have suggested that there could be such

a defense. See, e.g., United States v. Bazaarvoice, Inc., No.

13-cv-00133-WHO, 2014 WL 203966, at *64, *72–73 (N.D.

Cal. Jan. 8, 2014); United States v. Oracle Corp., 331 F.

Supp. 2d 1098, 1174–75 (N.D. Cal. 2004); but see California

v. Am. Stores Co., 697 F. Supp. 1125, 1132–33 (C.D. Cal.

1988) (finding that RSR barred an efficiencies defense), rev’d

on other grounds, 872 F.2d 837, rev’d on other grounds,

495 U.S. 271.

We remain skeptical about the efficiencies defense in

general and about its scope in particular. It is difficult

enough in § 7 cases to predict whether a merger will have

future anticompetitive effects without also adding to the

judicial balance a prediction of future efficiencies. Indeed,

even then-Professor Bork, a sharp critic of Clayton Act

enforcement actions, see, e.g., Robert H. Bork and Wade S.

Bowman, Jr., The Crisis in Antitrust, 65 Colum. L. Rev. 363,

373 (1965), rejected the efficiencies defense, calling it

“spurious” because it “cannot measure the factors relevant to

consumer welfare, so that after the economic extravaganza

was completed we would know no more than before it

began,” Robert H. Bork, The Antitrust Paradox: A Policy at

War with Itself 124 (1978). Judge Richard Posner has

regularly expressed similar views. See Richard A. Posner,

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 25 of 32
26 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

Antitrust Law 133 (2d ed. 2001) (“I said back then that there

should be no general defense of efficiency. I still think this

is right. It is rarely feasible to determine by the methods of

litigation the effect of a merger on the costs of the firm

created by the merger.”); Richard A. Posner, Antitrust Law:

An Economic Perspective 112 (1976) (“I would not allow a

generalized defense of efficiency.”); cf. Frank H.

Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1, 39

(1984) (“[N]either judges nor juries are particularly good at

handling complex economic arguments . . . .”).

Nonetheless, we assume, as did the district court, that

because § 7 of the Clayton Act only prohibits those mergers

whose effect “may be substantially to lessen competition,”

15 U.S.C. § 18, 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. For example,

if two small firms were unable to match the prices of a larger

competitor, but could do so after a merger because of

decreased production costs, a court recognizing the

efficiencies defense might reasonably conclude that the

transaction likely would not lessen competition. See Merger

Guidelines § 10 (“Merger-generated efficiencies mayenhance

competition by permitting two ineffective competitors to

form a more effective competitor, e.g., by combining

complementary assets. . . . [I]ncremental cost reductions may

reduce or reverse any increases in the merged firm’s incentive

to elevate price.”).

Because we deal with statutory enforcement, the language

of the Clayton Act must be the linchpin of any efficiencies

defense. The Act focuses on “competition,” so any defense

must demonstrate that the prima facie case “portray[s]

inaccurately the merger’s probable effects on competition.” 

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 26 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 27

Am. Stores, 872 F.2d at 842. In other words, a successful

efficiencies defense requires proof that a merger is not,

despite the existence of a prima facie case, anticompetitive.

Courts recognizing the defense have made clear that a

Clayton Act defendant must “clearly demonstrate” that “the

proposed merger enhances rather than hinders competition

because of the increased efficiencies.” United States v. Long

Island Jewish Med. Ctr., 983 F. Supp. 121, 137 (E.D.N.Y.

1997). Because § 7 seeks to avert monopolies, proof of

“extraordinary efficiencies” is required to offset the

anticompetitive concerns in highlyconcentrated markets. See

H.J. Heinz, 246 F.3d at 720–22; see also Merger Guidelines

§ 10 (“Efficiencies almost never justify a merger to monopoly

or near-monopoly.”). The defendant must also demonstrate

that the claimed efficiencies are “merger-specific,” see

United States v. H &R Block, Inc., 833 F. Supp. 2d 36, 89–90

(D.D.C. 2011), which is to say that the efficiencies cannot

readily “be achieved without the concomitant loss of a

competitor,” H.J. Heinz, 246 F.3d at 722; see also Merger

Guidelines § 10 & n.13. Claimed efficiencies must be

verifiable, not merely speculative. See, e.g., FTC v. CCC

Holdings Inc., 605 F. Supp. 2d 26, 74–75 (D.D.C. 2009);

Oracle, 331 F. Supp. 2d at 1175; see also Merger Guidelines

§ 10.

2. The St. Luke’s Efficiencies Defense

St. Luke’s argues that the merger would benefit patients

by creating a team of employed physicians with access to

Epic, the electronic medical records system used by St.

Luke’s. The district court found that, even if true, these

predicted efficiencies were insufficient to carry St. Luke’s’

burden of rebutting the prima facie case. We agree.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 27 of 32
28 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

It is not enough to show that the merger would allow St.

Luke’s to better serve patients. The Clayton Act focuses on

competition, and the claimed efficiencies therefore must

show that the prediction of anticompetitive effects from the

prima facie case is inaccurate. See Univ. Health, 938 F.2d at

1222 (finding efficiencies relevant to the prediction of

“whether the acquisition would substantially lessen

competition”). Although the district court believed that the

merger would eventually “improve the delivery of health

care” in the Nampa market, the judge did not find that the

merger would increase competition or decrease prices. Quite

to the contrary, the court, even while noting the likely

beneficial effect of the merger on patient care, held that

reimbursement rates for PCP services likely would increase. 

Nor did the court find that the merger would likely lead to

integrated health care or a new reimbursement system; the

judge merely noted the desire of St. Luke’s to move in that

direction.

The district court expressly did conclude, however, that

the claimed efficiencies were not merger-specific.15 The

court found “no empirical evidence to support the theory that

15 St. Luke’s argues that once a defendant comes forward with proof of

efficiencies, the burden shifts to the plaintiff to show that there are ways

of achieving those efficiencies without the merger. This tracks the

Sherman Act analysis. See, e.g., Bhan v. NME Hosps., Inc., 929 F.2d

1404, 1412–14 (9th Cir. 1991). But, in Clayton Act § 7 cases, after a

plaintiff has made a prima facie case that a merger is anticompetitive, the

burden of showing that the claimed efficiencies cannot be “attained by

practical alternatives,” Merger Guidelines § 10 n.13, is properly part ofthe

defense, see Olin, 986 F.2d at 1305 (explaining that it is the defendant’s

“burden to rebut a prima facie case ofillegality”). That burden, moreover,

is not unduly onerous, as the defendant need not disprove alternatives that

are “merely theoretical.” Merger Guidelines § 10.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 28 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 29

St Luke’s needs a core group of employed primary care

physicians beyond the number it had before the Acquisition

to successfully make the transition to integrated care,” and

that “a committed team can be assembled without employing

physicians.” The court also found that the shared electronic

record was not a merger-specific benefit because data

analytics tools are available to independent physicians.

These factual findings were not clearly erroneous. 

Testimony highlighted examples of independent physicians

who had adopted risk-based reimbursement, even though they

were not employed by a major health system. The record also

revealed that independent physicians had access to a number

of analytic tools, including the St. Luke’s Epic system.

But even if we assume that the claimed efficiencies were

merger-specific, the defense would nonetheless fail. At most,

the district court concluded that St. Luke’s might provide

better service to patients after the merger. That is a laudable

goal, but the Clayton Act does not excuse mergers that lessen

competition or create monopolies simply because the merged

entity can improve its operations. See Proctor & Gamble,

386 U.S. at 580. The district court did not clearly err in

concluding that whatever else St. Luke’s proved, it did not

demonstrate that efficiencies resulting from the merger would

have a positive effect on competition.

IV. Remedy

“The key to the whole question of an antitrust remedy is

of course the discovery of measures effective to restore

competition.” United States v. E. I. du Pont de Nemours &

Co., 366 U.S. 316, 326 (1961). “[T]he relief must be directed

to that which is necessary and appropriate . . . to eliminate the

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 29 of 32
30 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

effects of the acquisition offensive to the statute . . . and

assure the public freedom from its continuance.” Ford Motor

Co. v. United States, 405 U.S. 562, 573 n.8 (1972) (internal

citation and quotation marks omitted). Section 7 remedies

should not be punitive, but “courts are authorized, indeed

required, to decree relief effective to redress the violations,

whatever the adverse effect of such a decree on private

interests.” E. I. du Pont, 366 U.S. at 326.

The customary form of relief in § 7 cases is divestiture. 

See id. at 330 (noting that most litigated Clayton Act § 7

cases “decreed divestiture as a matter of course”); see also

ProMedica, 749 F.3d at 573; RSR, 602 F.2d at 1325–26; Ash

Grove Cement Co. v. FTC, 577 F.2d 1368, 1379–80 (9th Cir.

1978). Divestiture is the “most important of antitrust

remedies,” and “should always be in the forefront of a court’s

mind when a violation of § 7 has been found.” E. I. du Pont,

366 U.S. at 330–31; see also id. at 329 (“The very words of

§ 7 suggest that an undoing of the acquisition is a natural

remedy.”). This is especially true when the government is the

plaintiff. See Am. Stores, 495 U.S. at 280–81 (“[I]n

Government actions divestiture is the preferred remedy for an

illegal merger or acquisition.”).

St. Luke’s nonetheless argues that the district court erred

in ordering divestiture because (1) divestiture will not

actually restore competition; (2) divestiture eliminates the

transaction’s procompetitive benefits; and (3) a proposed

conduct remedy was preferable. We find no abuse of

discretion in the district court’s choice of remedy.

Although divestiture may generally be the most

straightforward way to restore competition, E. I. du Pont,

366 U.S. at 331, a district court must consider whether it will

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 30 of 32
ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS. 31

effectively do so under the facts of each case. “A primary

concern is whether the offending line of commerce, if

disassociated from the merged entities, can survive as a

viable, independent entity.” FTC v. PepsiCo, Inc., 477 F.2d

24, 29 n.8 (2d Cir. 1973). St. Luke’s argues that Saltzer

would no longer be able to compete post-divestiture, and that

divestiture therefore would not restore competition in the

Nampa PCP market.

The district court had ample basis, however, for rejecting

that contention. Indeed, in opposing a preliminary injunction,

St. Luke’s assured the court that divestiture was feasible. 

Moreover, Saltzer’s employees were assured bymanagement

that they would have their jobs no matter the result of the

litigation, and a number of them testified that Saltzer would

be viable as an independent entity. The district court also

noted that “any financial hardship to Saltzer will be mitigated

by St. Luke’s payment of $9 million for goodwill and

intangibles as part of the Acquisition . . . .”

Nor did the district court abuse its discretion in its

consideration of the costs and benefits of divestiture. The

court expressly determined that divestiture was appropriate

because any benefits of the merger were outweighed by the

anticompetitive concerns. See Am. Stores, 872 F.2d at 843. 

The Supreme Court has specifically stated that “it is well

settled that once the Government has successfully borne the

considerable burden of establishing a violation of law, all

doubts as to the remedy are to be resolved in its favor.” E. I.

du Pont, 366 U.S. at 334.

Finally, the district court did not abuse its discretion in

choosing divestiture over St. Luke’s’ proposed “conduct

remedy”—the establishment of separate bargaining groups to

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 31 of 32
32 ST. ALPHONSUS MED. CTR. V. ST. LUKE’S HEALTH SYS.

negotiate with insurers.16 Divestiture is “simple, relatively

easy to administer, and sure,” E. I. du Pont, 366 U.S. at 331,

while conduct remedies risk excessive government

entanglement in the market, see U.S. Dep’t of Justice,

Antitrust Division Policy Guide to Merger Remedies § II n.12

(2011) (noting that conduct remedies need to be “tailored as

preciselyas possible to the competitive harms associated with

the merger to avoid unnecessary entanglements with the

competitive process”). The district court, moreover, found

persuasive the rejection of a similar proposal in In re

ProMedica Health System, Inc., No. 9346, 2012 WL

1155392, at *48–50 (FTC March 28, 2012), adopted as

modified, 2012 WL 2450574 (FTC June 25, 2012). Even

assuming that the district court might have been within its

discretion in opting for a conduct remedy, we find no abuse

of discretion in its declining to do so. See ProMedica,

749 F.3d at 572–73 (holding that the FTC did not abuse its

discretion in choosing divestiture over a proposed conduct

remedy).

V. Conclusion

For the reasons stated above, we AFFIRM the judgment

of the district court.

16 Conduct remedies include “firewall, non-discrimination, mandatory

licensing, transparency, and anti-retaliation provisions, as well as

prohibitions on certain contracting practices.” U.S. Dep’t of Justice,

Antitrust Division Policy Guide to Merger Remedies § II.B (2011); see

also Areeda ¶ 990d.

 Case: 14-35173, 02/10/2015, ID: 9415382, DktEntry: 117-1, Page 32 of 32