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The FTC said the two acquisitions gave Renown control over 88% of the market for lucrative heart-care services.
The FTC said the two acquisitions gave Renown control over 88% of the market for lucrative heart-care services.

Reno system execs exit in wake of antitrust probe, lawsuit

By Joe Carlson
Posted: April 4, 2013 - 7:45 pm ET

The CEO and three other executives resigned from the largest healthcare provider in Reno, Nev., after an internal investigation of a physician-practice acquisition that drew a lawsuit and a federal antitrust investigation.

Renown Health President and CEO Jim Miller was replaced by interim CEO Donald Sibery. Board Chairman David Line was temporarily appointed president of the system. The other executives who resigned are General Counsel Kelly Testolin, Vice President Andy Pearl and Business Development Administrator Phil Schweber.

Renown's board of directors said in a series of statements and news releases that senior management did not give board members enough information leading up to the 2010 acquisition of Sierra Nevada Cardiology Associates.

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“There is no question that things did not go as planned, and for that, the board is sincerely sorry,” Line says in a video statement on the health system's website devoted to the Sierra Nevada Cardiology Associates controversy.

Not long after Renown acquired the 15-doctor cardiology practice in late 2010, the group's physicians filed a lawsuit in state court alleging that they were owed more compensation than system officials said they agreed to. A subsequent investigation by an independent law firm hired by the board found the root of the litigation was the failure to attach a negotiated compensation schedule to the original contract, which allowed the differing opinions to exist.

Renown acknowledged in a news release that the health system's lawyers overlooked the omission of the compensation sheets when the deal was signed. The system ultimately settled the lawsuit, paying the physicians $333,000 apiece and bringing their average compensation over two years to $1.4 million each, Renown said. That sum includes one-time payments of $240,000 for each physician's ownership interest in the practice.

Separately, the health system last year was embroiled in an antitrust investigation that turned into the Federal Trade Commission's first-ever antitrust complaint against a hospital acquiring a physician group. The investigation was triggered when Renown in March 2011 purchased the other major cardiology group in the region, the 16-doctor Reno Heart Physicians.

The FTC said the two acquisitions gave Renown control over 88% of the market for lucrative heart-care services. To resolve the matter, Renown agreed last August to temporarily release its cardiologists from noncompete contracts, until up to 10 cardiologists left to go work for competing healthcare providers.

By December, eight physicians had notified the system of their intentions to move to competitors, while two planned to move into private practice. Renown did not admit wrongdoing in the settlement, though the FTC said it allowed doctors to re-establish a competitive market for cardiac services in the Reno area.

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