The Federal Trade Commission’s increased focus on the antitrust implications of healthcare mergers and acquisitions has been widely publicized. While scrutiny has largely been directed toward hospital and health system transactions, a recent case in Nevada indicates that the FTC is now taking an interest in relatively small provider combinations in highly concentrated markets.
On August 6, 2012, the FTC voted 5-0 to enter into a proposed settlement with Renown Health which will require Renown Health to release its staff cardiologists in Reno from contractual non-compete clauses. Pursuant to the proposed agreement containing consent orders, Renown Health has agreed to settle FTC charges that its recent acquisitions of two cardiology groups in Reno reduced competition for the provision of adult cardiology services in the market.
In late 2010 and early 2011, Renown Health acquired the two largest cardiology groups in the Reno area – Sierra Nevada Cardiology Associates and Reno Heart Physicians. In connection with the acquisitions, Renown Health entered into employment agreements with the cardiologists affiliated with the practices. The employment agreements contained non-compete provisions which would prevent the physicians from joining medical practices that competed with Renown Health in Reno. As a result of the acquisitions and non-compete clauses, the FTC contended that Renown Health employed 88% of the cardiologists in the Reno area. The FTC’s complaint alleged that the consolidation of the competing practices into a single group controlled by Renown Health led to the elimination of competition based on price, quality and other terms, increasing the bargaining power that Renown Health has with insurers, which might result in higher prices.
The settlement is unusual because, pursuant to the proposed order, Renown Health does not have to unwind either transaction. Instead, Renown Health has agreed to temporarily suspend the non-compete provisions currently in place with the cardiologists, allowing the physicians to seek other employment, including positions with other hospitals in the Reno area. The non-compete provisions are to be suspended for at least 30 days while the FTC considers public comments on the proposed order. Up to 10 cardiologists will be allowed to join competing groups. After the FTC finalizes the consent order, another 30-day period will begin, during which other cardiologists may leave Renown Health if certain conditions are met, including the requirement that they intend to continue to practice in the Reno area for at least one year.
At any time during this second period, Renown Health may ask the FTC to end the release order if 10 cardiologists have left for competing practices. If fewer than six cardiologists have decided to leave Renown Health after this additional 30-day period, Renown Health must continue to suspend the non-compete provisions until at least six cardiologists have accepted offers with competing practices in the Reno area.
The Nevada Attorney General worked with the FTC to investigate and resolve this matter and has also entered into an agreement with Renown Health similar to the proposed settlement with the FTC.
For more information, please contact Beth Vessel at 615.850.8867 or any member of the Waller Healthcare Department at 800.487.6380.