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Sanford, Mid Dakota await appeal in Bismarck merger case

Sanford Health is considering a merger with Mid Dakota Clinic in Bismarck. Tom Stromme / Bismarck Tribune

BISMARCK—Attorneys are awaiting a court date for what will be the final showdown in the proposed Sanford Health and Mid Dakota Clinic merger.

Sanford and Mid Dakota appealed, in the U.S. Eighth Circuit Court of Appeals, U.S. District Court Magistrate Alice Senechal's preliminary injunction blocking the proposed merger. The judge sided with the Federal Trade Commission and North Dakota Attorney General's office that the merger could result in antitrust law violations should it be allowed to proceed before a final FTC determination can be made.

The appeal was screened for an oral argument at the end of March. An exact date for those arguments has yet to be determined, according to Sanford Health spokesman Jon Berg and FTC spokeswoman Betsy Lordan.

May 14-18 would be the earliest dates arguments could be heard.

If the injunction is upheld on appeal, Sandford and Mid Dakota have told the FTC that they will abandon the merger, according to court documents.

"There's always a good chance the court of appeals will find something in the U.S. District Court opinion with which it disagrees," said Thomas Horton, a professor of law and Heidepriem Trial Advocacy Fellow at The University of South Dakota School of Law who has tried a number of these cases for both the government and the defense.

Though not personally familiar with the case, Horton said the appeals court may find misinterpretation of some evidence or that measures of economic impact may not have been applied under more modern interpretations of the Clayton Act governing antitrust proceedings.

In their defense, Sanford Health and Mid Dakota argued that the buying power of Blue Cross Blue Shield of North Dakota, the state's largest insurance provider, would keep in check any competition lost from the proposed merger. They also made the case for a weakened competitor defense, arguing that, if the merger is denied, Mid Dakota could fail.

"Buyer power has had some success at the court of appeals level," Horton said.

Because CHI St. Alexius Health is the only other large provider in Bismarck-Mandan, BCBSND's testimony that it does not have adequate alternatives to offer to customers would likely hold weight, according to Horton. Sanford argues that it could not afford to let itself drop from BCBSND's ranks because so many people in the state use its coverage. However, the fact that Sanford's health plan is the state's second largest creates an issue, as the company could give its own health plan a price advantage, Horton said.

"I would not be surprised if it doesn't hold a lot of water with what the demand is for health care today," he said.

Horton also said he is not sure how CHI St. Alexius Helath's choice to back out of merger negotiations with Mid Dakota will add to the weakened competitor defense, sensing there are likely other hospital systems willing to take on the clinic. He said the price offered by those other systems won't likely be as high as Sanford's, though.

"It seems as though the defense in this case has a very high burden to show something wrong with the decision (from the court) below," he said.

Should Sanford and Mid Dakota win the appeal, the case would still face the hurdle of an FTC administrative law court hearing, which would be scheduled to begin 21 days after the Eighth Circuit opinion is issued. The FTC had no statistics on how often FTC-related decisions are overturned at the appeals level.