Mid Dakota Clinic’s board chairwoman said the clinic is unlikely to turn back to negotiations with CHI St. Alexius if its proposed merger with Sanford Health is blocked.
“We were burned once,” board chair and Mid Dakota family practitioner Dr. Shelly Seifert testified in U.S. District Court Friday.
Seifert’s testimony was part of four days worth of court hearings in an antitrust case filed by the Federal Trade Commission and North Dakota Attorney General to stop the clinic from merging with Sanford Health.
While this week’s hearings are only for a preliminary injunction to block a merger until a formal FTC hearing in Washington, D.C., Sanford's lawyer Bob Cooper said that these hearings are “typically where mergers get decided.”
“In every unconsummated merger case where a (preliminary injunction) is granted and upheld it has ended the merger,” he said.
In her testimony, Seifert told the court that financial projections for the clinic from its CFO show a 27 percent reduction in reimbursement for ancillary services over the next several years. Should that trend continue, as it is expected to, she said the clinic would “slowly implode.”
“The long term viability of (Mid Dakota Clinic) is in great danger if we’re not able to align with an integrated health system,” Seifert testified.
Parrell Grossman of the North Dakota Attorney General’s office argued to the contrary that it’s his belief that Mid Dakota will continue to be able to stand on its own. He said more harm would be done to patient choice and competition should the merger be allowed to go through.
Seifert called the decision to put the clinic up for sale “extremely difficult.”
“It’s easier to simply put our heads in the sand and hope things continue the way they are and ignore financial projections,” she said, but waiting around until then is not something she says a responsible board of directors would do.
As reimbursements decline, the clinic is losing its ability to pay above median wages, which has been its main tool for attraction and retention of physicians. And when competing with the likes of Sanford and CHI, the clinic doesn’t have the same budget for advertising and other employment perks, such as loan forgiveness.
In early 2015, Mid Dakota was in talks with both Sanford and CHI St. Alexius Health over potential mergers. In spring 2016, Mid Dakota lawyers said CHI St. Alexius walked away for undisclosed reasons.
Seifert said CHI originally met Mid Dakota’s terms and the doctors initially chose them over Sanford because they “felt more comfortable through familiarity.”
“That didn’t reflect negatively on Sanford,” she said. “It was just a better fit at the time.”
But a day or two before they were set to sign the agreement with CHI, the hospital system withdrew its offer, calling the clinic's executives into the hallway while doctors, who had expected a merger announcement, waited inside.
Seifert said the reason stated for CHI’s exit from the deal was not one previously stated by the hospital. The clinic was told there would not be a counter offer and Seifert said they were left feeling “played” and like they were just being given an excuse.
“I think it was a CHI corporate move to get itself out of the deal,” she said.
Seifert said CHI further insulted the clinic when it told the FTC it shares the agency’s concerns over harm to the community and decrease in quality of health care.
Cooper said CHI St. Alexius Health President Kurt Schley has said he would like to engage in talks with Mid Dakota again but that does not guarantee that the organization’s previous reasons for ending talks still exist and that Mid Dakota has made it clear it does not want to re-engage.
The FTC and Grossman summed up their week of arguments, citing testimony from insurers who say Sanford’s bargaining leverage would increase with the merger, leading to possibly higher prices for services being passed on to customers. And they said CHI, a merged Sanford and Mid Dakota’s only possible source of competition, would not be able to replace the doctors it would lose in the merger for three to 10 years.
The defense countered that CHI’s recruitment time estimates were self serving and that Blue Cross Blue Shield would still keep prices down because losing participation in their network would be financially devastating whether a merger went through or not.
U.S. District Court Magistrate Judge Alice Senechal said it was her goal to have a decision on the preliminary injunction before Thanksgiving and the FTC announced that the formal hearing on the merger has been pushed back to Dec. 12.
This story has been changed to reflect the correct percentage in reimbursement.