Healthcare Business News

First-of-its-kind FTC agreement on physician noncompete contracts spurs doc exits

By Joe Carlson
Posted: December 5, 2012 - 12:15 pm ET

Ten cardiologists in the Reno, Nev., area already are taking advantage of a first-of-its-kind settlement between Renown Health and the Federal Trade Commission that allowed the doctors to void their noncompete agreements and go to work for competitors.

The five-member FTC formally voted on Tuesday to approve a a previously announced settlement of a complaint the commission brought against Renown Health alleging that the three-hospital system had likely established an illegal monopoly in heart-care services. Between 2010 and 2011, Renown bought Sierra Nevada Cardiology Associates and Reno Heart Physicians, whose 31 doctors gave Renown control over 88% of the market for cardiology, the FTC said.

Rather than ordering Renown to unwind the deals, the FTC voted 5-0 on Tuesday (PDF) to order the health system to allow as many as 10 of its cardiologists to disregard language in employment contracts forbidding them from working for competitors. Although Renown did not admit wrongdoing in the settlement, the FTC said voiding 10 noncompete agreements would restore competition for cardiology in the Reno metro area.

Dan Davis, spokesman for the system, said Wednesday that eight physicians have already notified Renown that they intend to go to work for other area hospitals, and two others are planning to move into private practice.

Jim Miller, president and CEO of Renown Health, said the system stands by its acquisition decisions, which were designed to keep physicians in the local community and improve patient care.

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"We understand the pressures the FTC is under, but it would be helpful to the industry if various government agencies would speak with one voice on whether or not consolidation is a good thing in the era of healthcare reform," Miller said in an e-mailed statement. "One the one hand, we are being pressed to consolidate and integrate, and on the other we are being restrained by outdated laws regulating physician and hospital relationships."

Miller said that the physician groups approached Renown wanting to join the system because they wanted to remain together as a group "at a hospital that shared their passion for patients."

FTC officials have said previously that they intend to ratchet up scrutiny of hospital-physician mergers, even though the sizes of such deals often fall below the official threshold for mandatory review by the agency, which was set at $68 million for 2012.

An FTC spokesman confirmed last month that the agency is reviewing the pending acquisition of Idaho's largest physician practice, Saltzer Medical Group, by its largest hospital operator, Boise-based St. Luke's Health System.

Although the FTC has launched investigations of hospital-doctor deals in the past, the Renown complaint and order were said to be the first time the commissioners voted to take official action finding such a deal anticompetitive. It comes amid a wave of hospital-doctor mergers spurred on in part by the Patient Protection and Affordable Care Act.

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