Renown Health reaches agreement with FTC over noncompete contracts

(Story updated with comment from Renown Health at 2:45 p.m. ET Aug. 7,2012)

Renown Health of Reno, Nev., has agreed to release as many as 10 cardiologists from noncompete contracts to settle charges brought by the Federal Trade Commission that the health system had gained too much control of the market for cardiology by acquiring both major medical groups in the specialty.

Between 2010 and 2011, Renown acquired Sierra Nevada Cardiology Associates and Reno Heart Physicians, whose combined 31 cardiologists became subject to noncompete contracts that forbade them from joining medical practices that compete with the three-hospital system.

The FTC said virtually all of the cardiologists in the Reno area had been affiliated with one of the two practices. As a result of the acquisitions, Renown has about 88% of the area's cardiologists employed under exclusive arrangements. “Accordingly, the FTC alleged, competition for adult cardiology services was effectively eliminated,” FTC officials said in a news release.

The complaint and proposed consent agreement to restore competition were revealed Monday. The FTC will vote on final approval of the agreement after a 30-day public comment period.

Renown did not admit wrongdoing in settling the charges.

An e-mailed statement from the system said Renown decided to acquire the physician practices after the doctors approached hospital officials about a possible deal “because of the difficulties they were facing under healthcare reform.” The statement noted that most U.S. cardiologists are employed by hospitals, and that the goal of the deals was to retain the physicians in the local community.

The proposed settlement calls for Renown to suspend its noncompete agreements for 30 days and allow up to 10 cardiologists to join competing medical groups. If fewer than six cardiologists have left after 30 days, the suspension of the agreements will continue until at least that many have accepted offers with competing practices, according to the FTC statement.

FTC officials have said previously that they are increasing their scrutiny of physician-acquisition deals by hospitals, following the recent wave of merger-and-acquisition activity.