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Reporter Audrey Dutton delves into emails and other communication from

the St. Luke’s purchase of Nampa’s Saltzer Medical Group, ruled illegal by a

judge, and reveals the divisions and big bills that resulted. DEPTH, 1C

DEPTH: ST. LUKE’S TRIAL

Documents show discord,high cost of hospital deal

BSU receiver Thomas Sper-

beck has had a knack for

making highlight-reel

catches this season; he’ll

look to keep that going at

UNLV today. Kickoff is

at 1:30 p.m. SPORTS, 1-4B

BRONCO BLITZ

LOOKING TO GRABPASSES AND WINS

Sunday at 2 a.m., it really

will be 1 a.m., as clocks go

back an hour and standard

time returns.

DAYLIGHT SAVING TIME

DON’T FORGET TO FALL BACK!

A contract has been signed

with Boeing to produce new

tricked-out planes that fly

around the U.S. president,

something people in both

parties say is overdue. The

last new jets were delivered

in 1990. DEPTH, 1C

AIR FORCE ONE

PRESIDENT’S JETSTO GET UPGRADE

Looking for an outdoor adventure this fall or

winter? Idaho is full of fun trails to hike, bike or

cross-country ski. Afterward, you can reward your-

self with a relaxing dip in a hot springs — perhaps

at Gold Fork Hot Springs, above, near Donnelly.

Take a peek inside an elegant Boise remodel

From the design to the woodwork, Debra King and

Fred Choate, right, did a lot of the work on this

beautiful project themselves.

Find out how three Valley visual arts organizations

are working to inspire and build community.

Plus, read about three Idaho cookbook authors; Hat Ranch Winery and the

Idaho Wine Competition; Boisean Belinda Bowler’s new CD; new C of I

President Charlotte Borst; the Saint Alphonsus Festival of Trees; and more.

72-PAGE TREASURE MAGAZINE INSIDE TODAY FOR SUBSCRIBERS

Hit the trailsand hot springs

PETE ZIMOWSKY Special to Treasure Magazine

DARIN OSWALD doswald@idahostatesman.com

Alfred “Jeri” Young’s estate has

filed a federal lawsuit, saying that

had was denied proper medical care

in jail. NEWS, 4A

CANYON COUNTY

JAIL WORKERS, COUNTYSUED OVER MAN’S DEATH

EXPLORE

Growingpotatoeswith the helpof salt 5C

VARSITY EXTRA

Eagle, Kuna,Capital winas playoffsget started 6B

OPINIONS

Five badthings aboutthis time ofyear 2C

Partly cloudy

66°/49° See 11A

TOP STORIESSTAY CONNECTED

WORLD SERIES

The Mets rout the Royalsto close the gap to 2-1

SPORTS, 8B

ED LOTTERMAN

Are negative interest ratesa real possibility?

DEPTH, 1C

‘REAL VAMPIRES’

In New Orleans, a thirstfor drinking blood

EXPLORE, 5C

ISLAMIC STATE

Special forces headed to Syria to help rebels

NEWS, 8A

Catching Up 2ALocal news 4-5ANation 8-10AWeather 11ABronco Blitz 1B

Depth 1COpinions 2CExplore 5CComics 6-7CObituaries 8C

Now living in Southwest

Idaho, Shasta Groene is

trying to bring peace to her

life and look ahead. The

rest of her family was slain

10 years ago. NEWS, 5A

IDAHO

SURVIVOR ABOUTTO BECOME MOM

In suburbs and small towns, over-

doses and heroin use are more fre-

quent than ever, leading to some

novel concepts to deter it. 9A

DRUGS IN AMERICA

HEROIN PROBLEMGROWS AMONG WHITES

SATURDAY OCTOBER 31 2015 1CFACEBOOK.COM/IDAHOSTATESMAN

TWITTER.COM/IDAHOSTATESMANIDAHOSTATESMAN.COM

Depth HAPPY ABOUT FALL?

WELL, HERE ARE 5

THINGS ABOUT IT

THAT STINK 2C

OPINIONS

WASHINGTON

President Barack Obama hasmade clear what he will missthe most when he leaves officein 15 months. “People some-

times ask me what the biggestperk of being president is,” hetold visitors at the White Houselast week. “No. 1 is the plane.”

In September, he told anotheraudience that “the plane isnice” and that unfortunately forhim “my lease is running out,”so he might soon have to “start

taking off my shoes again goingthrough security.” In Kenya inJuly, he noted that when hevisited as a young man his lug-gage was lost: “That doesn’thappen on Air Force One.”

But the plane is getting old.After more than a million milesof flying while in office, its

current primary passenger isplanning to bequeath his suc-cessor — or perhaps his succes-sor’s successor — a new-and-improved Air Force One spiffedup for the smartphone age.

The Defense Departmenthopes to sign an initial contractwith Boeing in the comingweeks to begin the long processof assembling a new presi-dential aircraft capable of ferry-ing the commander in chiefaround the world with the ca-pacity to run a war from midairif necessary. Built on the frameof a Boeing 747-8, it will bebigger, more powerful, able tofly farther and vastly moreadvanced technologically thanthe current customized Boeing747-200B jumbo jet.

Obama himself will not bene-fit from the trade-in. By someestimates, the new plane maynot be available until 2023,when Hillary Rodham Clintonor Donald Trump or whoeverbeats them may be close tofinishing a second term. And itwill not be cheap. The Air Forcehas asked for $102 million inthe coming fiscal year and $3billion over the next five years,not counting any further cost.

“It’s way overdue,” said Jo-seph Hagin, a White House

DOUG MILLS The New York Times

Members of the Air Force One crew get ready to set the steps in place for President Barack Obama’s return after a trip to Michigan andPhoenix at Andrews Air Force Base in January.

AIR FORCE ONE

4,000 Square feet of space on AirForce One’s three levels,including an office,conference room, bedroomand medical suite that canbe used as an operatingroom

SEE PLANE, 4C

President’s top perk needs upgrade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The new plane will be bigger,more advanced technologically. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

It probably won’t be availableuntil 2023. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The cost will top $3 billion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BY PETER BAKER

New York Times News Service

dent is small. There are 12 suchpresidents who, together withseven members of the FedBoard of Governors, participatein eight regular meetings of thepolicy-making FOMC each year.

Most such presidents have avote only every third year. Ko-cherlakota’s last such votingyear was 2014. And he an-nounced months ago that he didnot want to be appointed toanother term.

He still has a voice, however.And, over most of his tenure

at the Minneapolis bank, he hasbeen an articulate advocate forgreater expansion of the moneysupply, and hence ever-lowerinterest rates, with the objectiveof increasing employment andfostering faster growth of out-put.

So even though it’s unlikely tohappen, Kocherlakota’s ideaprovides us with a real teachingmoment. Negative interest

rates? Jilted savers who haveearned next to nothing underseven years of next-to-zero in-terest rates may cringe at theprospect, but to really answerthis question one much firstdistinguish between “nominal”and “real” interest rates.

“Nominal” rates are the oneslisted in any promissory note,mortgage or credit card terms.They are the rate actually paidwithout any consideration ofinflation. “Real” rates take whatis paid and apply an inflationadjustment. If the rate on yourmortgage is 4.5 percent andinflation is 1.5 percent, then thereal rate is about 3 percent.

If the inflation rate is higherthan a nominal interest rate,then one has negative real rates.These are not uncommon. TheFed funds rate, the one for over-

regional cities like Helena,Mont., or Mankato, Minn., canaffect national monetary policy.So is the fact that that the de-centralized system of 12 semi-autonomous district banks con-tinues to generate a diversity ofideas in policy making that islacking in any other nation’scentral bank.

Narayana Kocherlakota, thesoon-retiring president of theMinneapolis Federal ReserveBank, certainly has broughtdistinctive ideas to U.S. mone-

Part of the unintended geniusin the design of the FederalReserve System is demonstratedby how speeches given by aonce-obscure academic in small

tary policy making. As evidence, consider that

after the September FederalOpen Market Committee meet-ing, Fed Chairwoman JanetYellen felt compelled to denythat the panel had given seriousconsideration to pushing interestrates into negative territory. Shedidn’t cite Kocherlakota byname, but everyone who followsthis knows he has been the onlyadvocate of such a move.

Understand that the formalrole of one district bank presi- SEE LOTTERMAN, 4C

REAL WORLD ECONOMICS

Just what would negativeinterest rates entail?

BY ED LOTTERMAN

Special to the Idaho Statesman

Researchers growspuds in salty water 5C

PLUS u COMICS, HOROSCOPES & MORE

ExploreIN THIS

SECTION

A storied medical groupwas born in the 1970s.The founding doctor wasJoseph Saltzer, whosechance encounter with a

rancher whose bull had astrep infection laid thepath to his success as aTreasure Valley physician.The Saltzer MedicalGroup grew from a hand-ful of doctors to becomeone of the largest practic-

es in the state.In 2013, one of its big-

gest business decisionswas the subject of a feder-al antitrust court case thatnational experts believedcould shape the future ofa common practice in the

health care industry: hos-pitals buying up doctors’practices.

At its heart, the lawsuitalso was about the futureof two Idaho health caregiants: St. Luke’s andSaint Alphonsus healthsystems. Both of the sys-tems wanted to build newhospitals in Nampa,where Saltzer is based.There were hundreds ofmillions of health caredollars up for grabs inCanyon County, and ma-

ny patients from therewere driving to Boise orMeridian for care.

Saltzer was a linchpin.The story of St. Luke’s

multimillion-dollar pur-chase of Saltzer — and theongoing battle after ajudge ruled the buyoutillegal — is told in hun-dreds of documents. Theyoffer an intimate look atthe year in which Saltzersplit into factions; St.Luke’s and Saint Alphon-sus tried to predict what

the takeover and the law-suit would mean for them;and the dealmakers keptgoing even after authori-ties cautioned them notto.

A SCHISM

Saltzer worked with St.Luke’s for decades. Theycoordinated in the mid- tolate 2000s, recruitingdoctors and growing intandem in Nampa andMeridian.

In 2011, they got se-rious about uniting. Saltz-er was the biggest pri-mary-care provider in

ST. LUKE’S TRIAL

Saltzer deal led to friction,factions, millions spent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Saltzer might end up costing St. Luke’s more than $40 million. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Emails, text messages show doctors turned against each other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Hospitals offered salary guarantees, time off, extra pay for on-call time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BY AUDREY DUTTON

adutton@idahostatesman.com

SEE ST. LUKE’S, 3C

$16.5 MILLIONThe lower end of how muchSaint Alphonsus and St.Luke’s expected to spend onSaltzer

WK4415 3CDepthIDAHOSTATESMAN.COM

Canyon County, and St.Luke’s was the “dom-inant” hospital system inthe entire Treasure Val-ley. Their union madesense, Saltzer leadersbelieved. Leaders fromboth organizations as-sembled a team of five tosix people to negotiate adeal.

Those talks took a turnin October 2011. TheSaltzer practice at thetime was co-owned bymore than two dozenphysicians. Their habitsand desires did not alwaysmesh. The prospect ofjoining St. Luke’s tickedoff some of the doctors.They didn’t want to beunder the thumb of ahealth system. Theyowned shares of TreasureValley Hospital — a surgi-cal center that competedwith St. Luke’s and even-tually sued St. Luke’s overthe Saltzer deal. Theywanted an exit strategy ifthe buyout went wrong.

But talks progressed,and Saltzer had offers onthe table from St. Luke’sand Saint Alphonsus. Aspokesman for Saint Al-phonsus — a local healthsystem that is part of themuch larger, nationalCHE Trinity Health —said its bid was in part adefensive move to keepSt. Luke’s from acquiringthe physician group.

DOLLARS AND CENTSBoth offers initially

contained clauses thatwould require Saltzerdoctors not to competewith the health systems ifthey decided to part ways,a Saltzer documentshows.

Both also offered salaryguarantees, sabbaticals,eight or 12 weeks of vaca-tion per year, and $1,000or $3,300 per weekend todoctors who agreed to beon call beyond their usualschedule (though Saltzersaid the $1,000 offeredby St. Luke’s was “un-acceptable” and should berevised).

Thousands of dollarsfor a weekend wasn’tunheard of at the time. A

national report based on2012 data said on-callcompensation rangedfrom $75 to $2,400 perday, with about 35 per-cent of doctors receivingthose daily stipends. Sur-geons claimed a median$1,000-a-day stipend;primary-care doctorsmade $150 a day.

UNINTENDEDCONSEQUENCES

In the end, Saltzer vot-ed to go with St. Luke’s —a decision that turned outto be a costly and trickymove for both businesses.

The state, federal andprivate plaintiffs arguedthat St. Luke’s was poisedto profit from the Saltzeracquisition well into thefuture — not just from thepatients Saltzer wouldbring, but from the re-ferrals Saltzer wouldmake to St. Luke’s sur-geons, specialists, medicalimaging centers and lab-oratories.

St. Luke’s offered to paySaltzer’s primary-caredoctors more than whatthey made as independentdoctors. It expected tofund those raises throughhigher Medicare charges— because Medicare paysmore for procedures whenthey’re under the umbrel-la of a hospital — andthrough “other down-stream revenue sources”such as labs, specialistsand imaging.

There also is evidencein the documents that St.Luke’s, as it became alarger player in a commu-nity, could demand higherpayments from insurancecompanies.

But, at least when theacquisition was beingcompleted, St. Luke’sprojected a net incomefrom Saltzer of $91,000for the year — a fractionof 1 percent of its multi-million-dollar investmentin the buyout. The healthsystem had its eye onCanyon County as agrowing population hub,and it needed to haveprimary-care doctorsflying the St. Luke’s flagthere, especially as it

drafted plans to build afull-scale hospital nearby.

PRACTICE TORN APARTThe deal gutted Saltz-

er’s business, according toSaltzer’s recent state-ments to a federal court.

Saltzer revenues wereabout $45 million per yearbefore it was acquired.Emails exchanged be-tween Saltzer doctors whoowned the business at thetime say that amount wascut in half when several ofSaltzer’s most profitablesurgeons left because theydidn’t want to become St.Luke’s employees.

For months, the pros-pect of joining St. Luke’screated a schism at Saltz-er.

The many doctors whoheld ownership — andvotes — in Saltzer splitinto factions. They wrotescathing emails and textmessages, some usingmild profanity. They en-gaged in campaigns towin hearts and minds,sending letters to partners

who were on the fence.Employees involved in thedeal talked about the tollit took on what had beenthe longest-running busi-ness of its kind in thestate.

“(It) saddens me thatthe group has becomedivided in the past severalmonths as this Luke’sdeal rapidly approachesclosure,” said one emailfrom Andrew Curran, aSaltzer doctor who laterleft to work for Saint Al-phonsus.

BATTLE GOES PUBLICWhen it learned that

Saltzer was planning tosell to St. Luke’s, the Ida-ho attorney general andthe Federal Trade Com-mission took interest.They began an investiga-tion into possible antitrustviolations — and warnedthe businesses to put thedeal on hold or risk beingsued.

St. Luke’s and Saltzerpressed on and madeplans to close the sale in

late 2012.Saint Alphonsus and

Treasure Valley Hospitalsued, asking a federaljudge to block the dealuntil antitrust allegationswent to trial. The requestfor a temporary blockgave Saint Alphonsussome time to weigh itsoptions.

Sally Jeffcoat, then theCEO of Saint Alphonsusand now a regional exec-utive for CHE TrinityHealth, exchanged emailswith other Saint Alphon-sus leaders about a weekbefore suing. Jeffcoatsuggested the hospital“double down on ourphysician liaison andbusiness developmentstrategy.” If the judgeblocked the deal, she said,Saint Alphonsus shoulduse the time to “developan approach for Saltzer.”

She also wondered,“What will happen to ourproject we are buildingcurrently, and what willwe do to address the po-tential build of a hospitalby (St. Luke’s in Nampa).”

EYE ON THE FUTURETo open a new hospital,

Saint Al’s and St. Luke’sboth needed doctors whowould be willing to staffits departments. Theyneeded doctors to admitor refer patients to thenew hospital for surgeriesand other procedures.

Saint Alphonsusplanned to build a new,updated hospital nearInterstate 84 to replace itsaging one about 20 min-utes south of the highway.Saint Al’s feared itwouldn’t have enoughreferrals and admissionsfor that hospital if Saltzerjoined St. Luke’s andstarted to steer patients toSt. Luke’s hospitals.

St. Luke’s executivesand several doctors havesaid that worry is un-founded. In court testimo-ny, they said St. Luke’sand Saltzer both refer tocompetitors and wouldn’tstop.

Saint Alphonsus ChiefFinancial Officer Blaine

Petersensaid in aStatesmaninterviewthat “thedecision tobuild thereplace-ment hos-pital had todo with the

demographics. ... Beingmore convenient to alarger number of patients.Building a state-of-the-art

FROM PAGE 1C

ST. LUKE’S

BlainePetersen

KATHERINE JONES kjones@idahostatesman.com

Saltzer Medical Group went from a multimillion-dollar independent practice to a leaner group owned by a largerhealth system within about a year. St. Luke’s now says it can’t find anyone willing to take over Saltzer and that itcannot just release the practice, because Saltzer won’t take back the specialized services St. Luke’s had absorbed.

‘‘I GUESS I’M SEEING FIRSTHAND WHATGREED CAN DO TO INDIVIDUALS.

Nancy Powell, Saltzer’s former chief financial officer,in a 2011 email

‘‘IF WE DIDN’T THINK THERE WAS ANALIGNMENT, WE WOULD NOT HAVEMOVED FORWARD. Chris Roth, chief operating officer of St. Luke’s Health System

‘‘SALTZER IS DEALING WITHSIGNIFICANT INTERNAL FRICTION ...

Confidential discussion document related to 2012 Saltzer acquisition

SEE ST. LUKE’S, 4C

‘‘IT IS FAIR TO SAY THE LEGAL ISSUES HAVE BEEN WIDELYDISCUSSED AND REVIEWED. MEANWHILE, OUR FOCUS AT SALTZER MEDICAL GROUP REMAINS DIRECTED TO THE FUTURE AND ENSURING THE HIGHEST QUALITY CAREFOR OUR PATIENTS. Saltzer President John Kaiser in an email to the Statesman

1.

WHY IS ST. LUKE’S MAKINGSUCH A PUSH INTO CANYONCOUNTY?

One reason: Giving westernTreasure Valley residents theoption of going to St. Luke’swithout having to drive an hour.

Another reason: Money.Canyon County residents

going to St. Luke’s emergencyrooms in Boise and Meridianbrought St. Luke’s about $140million of its local revenues in2010.

“Canyon County is very sig-nificant to St. Luke’s,” said apresentation slide that showedhow much of St. Luke’s localbusiness is made up of CanyonCounty patients going into AdaCounty for medical care.

2.

“EPIC” GAVE SOME ST.LUKE’S DOCTORS AN EPICHEADACHE

Couldn’t get an appointmentwith a St. Luke’s doctor? One ofthe nation’s most popular elec-tronic medical records systemsmight have been to blame.Several doctors in SouthernIdaho griped to St. Luke’s exec-utives about difficulty findingtime to see patients as St.Luke’s rolled out the expensivenew system.

A St. Luke’s pediatric grouphad to stop taking new patientsfor a while because of the tran-sition to the Epic system. Somedoctors had to cut back theirschedules by 50 percent as theystruggled to get acclimated tothe new setup.

A top executive at St. Luke’scalled the productivity prob-lems stemming from the newsystem “really worrisome.”

3.

ST. LUKE’S OFFERED $5,000TO PROVIDERS WHOSUCCESSFULLY RECRUITEDCERTAIN PRIMARY-CAREDOCTORS

Some years back, St. Luke’soffered a hefty bonus to doctorsand “midlevels” — nurse practi-tioners and physician assistants— to recruit internal medicinephysicians, who at the timewere in short supply. The re-quirement? The newly hireddoctor must work for St. Luke’sfor 30 days.

The hospital system said itsometimes offer bonuses forother positions as well, such aspharmacists or specialized nurs-es. The amount varies, and thebonuses are offered only whenthere’s a shortage of certainhigh-demand employees.

4.

ST. LUKE’S EXECUTIVESTOLD BOARD MEMBERSTHEIR GOAL IS TO SLOWTHE RISING COST OFHEALTH CARE

Internal documents turnedover by St. Luke’s say the healthsystem’s goal in teaming upwith Utah-based insurer Select-Health — they signed a contractthat rewards St. Luke’s finan-cially for efficiency — was to“decrease the premiums thatpatients pay.”

St. Luke’s was frustrated byyears of talk and no action withIdaho health insurers aboutchanging how health care ispaid for, and the perverse in-centives that have been createdby the pay-per-procedure sys-tem of insurance.

St. Luke’s said that paymentsystem was partly the fault ofproviders, including itself.

The documents also showthat St. Luke’s got SelectHealthto agree to offer insurance plansbuilt “exclusively” around anetwork created by and com-posed mainly of St. Luke’s clin-ics and affiliates.

Those plans are the cheapestavailable in some parts of Ida-ho, but patients generally can-not see Saint Alphonsus provid-ers unless they want to payout-of-network rates.

5.

ONE PATIENT’S LAB COSTSROSE 490 PERCENT

When a cancer patient wrotean email to St. Luke’s CEODavid Pate saying her costs forbloodwork spiked from $40 to$236 after her doctor joined St.Luke’s, she prompted a string ofemails among St. Luke’s em-ployees and leaders.

Her bloodwork was suddenlybilled as occurring in a hospital,and her insurance planwouldn’t cover that, leaving herwith the full charge.

“Unfortunately she has areally good handle on whathappened,” said one email.Another said she worked for theIdaho Statesman, making thesituation “sensitive.”

Finally, a hospital leadersuggested St. Luke’s “defusethis specific instance with aone-time refund and hope theissue dies there.”

The patient, Michelle Philip-pi, is an advertising sales man-ager for the Statesman. She didnot share her employment in-formation with St. Luke’s in theemail and is not sure how peo-ple knew where she worked.

A St. Luke’s employee calledon Christmas Eve and told hernot to worry about the bill.“They just wrote off the whole$236,” she said. “I’m obviouslyhappy with how it turned out,but I feel for people who didn’tknow” why their costs rose.

ST. LUKE’S TRIAL

Five facts revealed by internal documents

BY AUDREY DUTTON

adutton@idahostatesman.com

ONLINE

See documents related to the St. Luke’s antitrust trial and read a column by Audrey Dutton about why and how the Statesman did this series of stories at IdahoStatesman.com

4C WK4415Depth IDAHOSTATESMAN.COM

deputy chief of staff underPresident George W. Bushwho initiated plans for anew plane only to seethem shelved when thenation’s finances grewprecarious. “You can hangnew engines on it, you cancram all sorts of new tech-nology on it, but it’s still avery old airplane.”

Air Force One is actuallynot a single plane; in fact,it is a radio call sign usedfor any plane that happensto carry the president.There are two 747-200s,designated VC-25As bythe Air Force, that carrythe president unless hetravels to a place wherethe runway is too short, inwhich case he switches toa smaller plane.

Those 747-200s, withtail codes 28000 and29000, were commis-sioned by Ronald Reaganand delivered in 1990under the first PresidentGeorge Bush, when theSoviet Union was stillaround and White Houseaides used beepers. Thebig communications in-novation at the time was afax machine that the presi-dent’s staff could use tokeep in touch with theground.

Boeing stopped making747-200s more than twodecades ago, and only 20

of them are left flying inthe world, mainly asfreight planes in devel-oping countries. Spareparts are no longer madefor the plane, so the AirForce often has to havethem custom built. In-spections and mainte-nance work are so fre-quent that one or the otherof the two planes is oftenout of service.

Air Force One, ofcourse, is not just a plane.It is power. It is nationalidentity. It is even a moviestar. The large blue-and-white aircraft with “UnitedStates of America” embla-zoned on the side hascome to symbolize thecountry and has capturedthe imagination of evenAmericans who have notseen the namesake filmstarring Harrison Ford as apresident fending off Rus-sian hijackers.

Franklin D. Rooseveltbecame the first presidentto fly aboard a plane con-verted for his use, calledthe Sacred Cow, in 1945.The Air Force One desig-

nation was said to first beused during Dwight D.Eisenhower’s tenure, but ithas achieved such world-wide status that a Kenyanwoman who gave birtharound the time of Oba-ma’s visit last summereven named her babyAirForceOne Barack Oba-ma.

“That airplane repre-sents every American, andit’s a symbol of our repub-lic,” said Jeff Underwood,the historian at the Na-tional Museum of the U.S.Air Force near Dayton,Ohio. “People see it as anextension not only of thepresident but the UnitedStates. It has a visceralnational pride sort ofthing.”

Nine previous Air Force

One planes are on displayat the museum, includingthe Boeing 707 that car-ried John F. Kennedy toDallas in November 1963,then brought his bodyback to Washington afterLyndon B. Johnson tookthe oath of office onboard. The Air Force Oneon display at Reagan’spresidential library inCalifornia, seen during therecent Republican presi-dential debate, is on loanfrom the Air Force Mu-seum.

The current plane is aflying White House. Whileimpressive, it is notsplashy in the sense ofTrump’s private jet with itsgold-plated fixtures.

On the day of the Sept.11, 2001, attacks, the sec-

ond President Bush waskept flying from air base toair base for fear of hisbeing targeted, and he wasdeeply frustrated withspotty communications,leading to upgrades after-ward.

The Air Force selectedBoeing as the maker of thenext plane this year. The747-8 will have 66,500pounds of engine thrust.Once modified, it will becapable of midair refuel-ing, hardened against theelectromagnetic pulse of anuclear explosion andalmost certainly equippedwith defenses to deflectheat-seeking missiles.

This sort of project has away of ballooning in cost.A project to build a newMarine One helicopter got

so out of control that Oba-ma’s administration can-celed it after taking officeand a new contract hasbeen issued.

“We hope that doesn’thappen with the plane,that they’ve learned theirlesson,” said ThomasSchatz, president of Citi-zens Against GovernmentWaste, a group that crit-icized the Marine Oneproject.

So far, members of bothparties seem to be goingalong with plans for a newplane. After all, no oneknows which side willhave the White Housewhen it becomes availablefor use.

Obama is not the onlypresident to love theplane. “I miss Air ForceOne,” the younger Bushsaid last year. “In eightyears, they never lost myluggage.” This year, herepeated the sentiment. “Imiss, for example, the AirForce’s accommodatingme with a shower on theairplane that flew mearound,” he said.

When Obama cam-paigned with Bill Clintonin 2012, the incumbentjoked about Air Force One.“Bill may not miss beingpresident, but he missesthat plane,” Obama said.“Let’s face it, he does. It’sa great plane. And I’ll missit, too.”

“But not yet!” a support-er called out.

Not yet. But soonenough.

The present Air Force One planes were commissioned by President Ronald Reagan.

FROM PAGE 1C

PLANE250Length in feet of the Boeing747-8 that will serve as theplane’s frame

7,800Flying range in miles of thejet

night loans between banksthat is the targeted in-dicator for Fed policy, hasbeen around 0.25 percentfor six years now. Con-sumer inflation, thoughlow, has averaged 1.6percent per year over thattime. So the real overnightinterest rate has beenabout a negative 1.35 per-cent.

My father died the yearI was born, so my smallinheritance was put intoTreasury bonds until my21st birthday. Inflationaveraged 2.5 percent ayear and the bonds onlyearned 2 percent, so thereal buying power of mylegacy shrank. But thosewho went through thegreat inflation of the 1970swith lower fixed-ratemortgages made out very

well. So negative real rates

are not unknown. Andachieving such rates couldbe an overt policy ob-jective. When economistMilton Friedman andformer Fed chair BenBernanke talked figura-tively of the possibility ofdropping money fromhelicopters to stave offdeflation in a dire crisis,this is what they had inmind. Create enoughmoney, their argumentwent, interest rates willfall and prices must rise.

One could go an addi-tional step and make somenominal rates negative.Instead of paying banksinterest on reserves, ordeposits not loaned out,that banks keep with theFed, it could levy a fee on

them. The stimulus here is that

banks might begin lendingmore freely, thus givingconsumers more cash tospend and businessesmore money to buy newequipment, thus spurringoverall demand for goodsand services.

Implementing negativenominal rates is rare,although Switzerland, nowfacing an influx of eurosfleeing the European Cen-tral Bank’s own zero-interest rates, may imposefees on deposits and bankreserves as a last ditcheffort to keep the ex-change value of its cur-rency from rising toomuch.

Trying to impose nega-tive nominal rates opensmyriad cans of worms,however, especially interms of administeringday-to-day bank oper-ations. And it would behugely unpopular withsmall savers.

So believe Fed ChairYellen when she says thatthe FOMC as a whole isnot considering an overtnegative interest ratepolicy. But understandKocherlakota’s argumentthat our central bankcould and should do moreto increase employment.

I am torn. Kocherlakotaearned a reputation forbright and wide-rangingacademic research. Onlymonths before moving tothe Minneapolis bank, hejoined other conservativeeconomists in signing anopen letter opposing theObama administration’sfiscal stimulus plan.

So when he became anoutspoken advocate ofusing monetary policy tospur output and employ-ment, it was a “road-to-Damascus” conversion. Inmy view, he moved in theright direction, but likemany enthusiastic con-verts, he moved too far.

Yes, loosening monetary

policy in the face of arecession is correct. Yes, itis vital to avoid deflation.And yes, there are severalhistorical examples ofcentral banks tighteningtoo early and too much.

However, as in manyother things, there is anelement of diminishingreturns to monetary eas-ing. The positive effects ofinitial lowering in a reces-sion may be great, butover some range, as nomi-nal and real interest ratesget lower and lower orbecome negative, theadditional spurring ofemployment and outputshrinks. Unfortunately,events of the past eightyears show how weak ourunderstanding of the ma-cro economy still is. Onlytime will tell us who isright.

Also, Kocherlakota andother advocates of evenlooser money, includingNobelists Paul Krugmanand Joseph Stiglitz, focus

almost exclusively onconsumer prices and ig-nore the prices of assetslike real estate and stocks.As a farmland owner,perhaps I focus too muchon this factor. But it seemsclear that while consumerinflation remains in check,farmland, some urbanhousing and the stockmarket all contain somedegree of a Fed-inducedprice bubble.

I deeply respect theMinneapolis president. Ihave a gut sympathy forhis objectives. We willmiss his voice after Jan-uary. But I don’t think heis correct in this issue.Perhaps time will render averdict, but this may be anissue that historians willstill be debating a centuryfrom now.

St. Paul economist andwriter Edward Lottermancan be reached atboise@edlotterman.com.

FROM PAGE 1C

LOTTERMAN

facility. We would havedone it regardless of whathappened with Saltzer.”

But, he said, the litiga-tion “caused us to pause”those plans.

Meanwhile, St. Luke’shad sketched out plans for— and borrowed morethan $100 million it coulduse to build — a hospitalin Nampa. “In order tobuild a new hospital, youneed to have the supportof a medical staff,” saidminutes from a St. Luke’sexecutive meeting. “Hav-ing the support of (Saltz-er) would be helpful.”

St. Luke’s broke groundthis August on the $97million hospital next to itsexisting health plaza nearMidland Boulevard andCherryLane.

St. Luke’sChief Oper-ating Offi-cer ChrisRoth toldthe States-man that St.Luke’s had“intendedall along toproceed with the hospital,because that’s what thecommunity needs, regard-less of whether we have

an affiliation or integra-tion with Saltzer.

“That said, the ... sup-port of the medical com-munity is crucial.”

Saint Alphonsusthought that if St. Luke’sopened a new Nampahospital, it would have a“devastating” effect onSaint Alphonsus, accord-ing to a document theSaint Alphonsus NampaCEO approved.

QUESTIONS RAISED

WITHIN ST. LUKE’S

Debate also bubbledwithin St. Luke’s. ThomasHuntington, a doctor andmember of the regionalboard of directors thenand now, questioned thepractice of buying outdoctors, writing in anemail, “Let’s be realistic.Employing physicians isnot achieving better costs.It is achieving better pro-fit.”

A St. Luke’s cardiologistcomplained that someSaltzer doctors did notmeet clinical, ethical andcultural standards.

“It will be very dis-appointing to us doctorswho work on the west side(of the Treasure Valley) tohave to refer to these guys

because they are now partof Luke’s when we arefully aware that they offera far inferior product towhat our colleagues atIPA (Idaho PulmonaryAssociates in Meridian)can provide,” the doctorwrote in an email.

Roth said there wasoverarching support in-side St. Luke’s for theacquisition.

“Anytime you workwith a large group, (thereare) things in any mergeror acquisition you end upworking through,” he toldthe Statesman. “At thehighest level (you have)pretty good alignment,and then ... you workthrough the details.”

At the same time, theFederal Trade Commis-sion’s inquiry into theSaltzer deal put on holdthe St. Luke’s acquisitionof another business: theElmore Medical Center,which had been a taxdistrict-owned hospital in

Mountain Home. TheSaltzer legal issues, pairedwith the hurdles of weav-ing together two busi-nesses, delayed thatmerger by about a year.

There was a hiccupalong the way after Saltz-er became part of St.Luke’s.

St. Luke’s and Saltzeremphasized in court docu-ments at the trial thatSaltzer doctors would nowbe able — and required —to take low-income Med-icaid and uninsured pa-tients in Canyon County.But emails a few monthsafter the takeover de-scribed “the third exam-ple of Saltzer turningdown Medicaid patientsin less than a week.”

The deal cost St. Luke’sdearly, and the takeovercosts aren’t over yet.

St. Luke’s put about$16.5 million just intogetting the deal done.That included a paymentto Saltzer doctors of about

$9 million that they wouldkeep if the deal eventuallyfell through.

St. Luke’s also promisedto pay Saltzer’s doctors aguaranteed salary thatwitnesses testified wasabout the same as the$8.5 million to $9.5 mil-lion that Saint Alphonsushad offered.

The ensuing lawsuit willcontinue to cost St. Luke’smoney. St. Luke’s said inrecent court filings that itcould be on the hook formore than $25 million inattorney fees and costs.

INSIDE SALTZER

The internal emailsindicate that Saltzer doc-tors wondered if theywere getting into a bindfrom which Saltzer’s onlyexit was to join a largersystem.

As the Federal TradeCommission scrutinizedthe deal, and a handful ofsurgeons quit, at least oneSaltzer doctor voicedalarm, asking why thepractice wasn’t coming upwith a contingency planfor survival if the acquisi-tion fell apart.

Saltzer today is workingthrough those issues,having told a federal courtthat post-acquisitionSaltzer cannot simplyresume its prior business.

After tens of millions ofdollars sunk into a deal,Saltzer told the court

earlier this year, the prac-tice is now incapable ofreturning to its formerself, one of the most ro-bust health care busi-nesses in the TreasureValley. It could not affordto reclaim its labs andother “ancillary” services.

Saltzer President JohnKaiser declined to beinterviewed for this story.Through a spokesperson,he sent the Statesman thisstatement:

“The Idaho Statesmanhas now written a half-dozen stories looking backat a complex court casethat was decided in 2014....

“Anyone followingthese issues is aware thathealth care in the Trea-sure Valley is now, andalways has been, a ‘teamsport’ where a variety ofproviders in a range oflocations work together toprovide the best possibleoutcome for patients. Weremain committed to thatproposition.

“We certainly respectthe decision of the court,and we continue to workto implement a plan thatserves our patients andhelps ensure Saltzer’seconomic viability far intothe future.”

Audrey Dutton:208-377-6448,@IDS_Audrey

FROM PAGE 3C

ST. LUKE’S

Chris Roth

‘‘OUR PR CAMPAIGN WILL HAVE TO BE EFFECTIVE, WITH BEING PATIENTCENTERED AND KEEPING PATIENTSCLOSE TO HOME.

Sally Jeffcoat, former Saint Alphonsus CEO, in a 2012 email