## Facts

- St. Luke’s Health System acquired Saltzer Medical Group in 2012; Saltzer was the largest independent, physician-owned multispecialty group in Idaho and was based in Nampa.
- The Federal Trade Commission, the State of Idaho, and competing local hospitals challenged the acquisition under § 7 of the Clayton Act and state law.
- Plaintiffs alleged the deal would substantially lessen competition in the market for adult primary care physician services in Nampa, Idaho.
- After a bench trial, the district court found the acquisition likely to harm competition and ordered St. Luke’s to divest Saltzer, while also finding St. Luke’s pursued the deal largely to improve patient outcomes.
- St. Luke’s and Saltzer appealed, disputing market definition, proof of competitive harm, treatment of efficiencies, and the divestiture remedy.

## Issues

1. Whether the district court clearly erred in defining the relevant product and geographic markets as adult primary care physician services in Nampa, Idaho.
2. Whether plaintiffs proved a prima facie § 7 case that the acquisition may substantially lessen competition.
3. Whether asserted efficiencies and quality improvements rebutted the prima facie showing of likely anticompetitive effects.
4. Whether ordering divestiture was an abuse of discretion.

## Decision

- The Ninth Circuit affirmed the judgment that the acquisition violated § 7 of the Clayton Act.
- The court held the district court did not clearly err in adopting Nampa as the relevant geographic market for adult primary care physician services.
- The court held the district court did not clearly err in finding a prima facie case of likely anticompetitive effects based on increased concentration, barriers to effective entry, and the merged entity’s enhanced bargaining leverage with payors.
- The court held the district court did not clearly err in concluding defendants failed to show efficiencies that would improve competition or that were sufficiently merger-specific to offset the likely harm.
- The court held divestiture was within the district court’s discretion and was an appropriate remedy to restore pre-merger market conditions.

## Legal Principles

- Section 7 of the Clayton Act prohibits acquisitions whose effect “may be substantially to lessen competition, or to tend to create a monopoly.”
- Merger challenges apply a burden-shifting framework: plaintiffs must establish a prima facie case of likely anticompetitive effects; defendants may rebut; the ultimate burden of persuasion remains with plaintiffs.
- Relevant market definition turns on evidence of how buyers and sellers operate in practice, including payor network realities and patient/provider patterns.
- Structural evidence of concentration and likely price effects can support a prima facie case; defendants must provide persuasive evidence to counter the inference of harm.
- Efficiencies may rebut a prima facie case only if they are verifiable, tied to competitive effects, and sufficiently merger-specific; quality improvements alone do not excuse a merger that is likely to lessen competition.
- Divestiture is a standard structural remedy in successful § 7 cases when needed to reestablish competition and conduct remedies are inadequate.

## Conclusion

The Ninth Circuit upheld a finding that St. Luke’s acquisition of Saltzer likely reduced competition in adult primary care services in Nampa and affirmed divestiture, holding that claimed quality and coordination benefits did not offset or negate the merger’s likely anticompetitive effects under § 7.


Saint Alphonsus Med. Ctr.–Nampa Inc. v. St. Luke's Health Sys., Ltd., 778 F.3d 775 (9th Cir. 2015)