Opinion ID: 2778249
Heading Depth: 4
Heading Rank: 2

Heading: The St. Luke’s Efficiencies Defense

Text: 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. 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 of the defense, see Olin, 986 F.2d at 1305 (explaining that it is the defendant’s “burden to rebut a prima facie case of illegality”). That burden, moreover, is not unduly onerous, as the defendant need not disprove alternatives that are “merely theoretical.” Merger Guidelines § 10. 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.