The Federal Trade Commission will allow Minnesota provider CentraCare Health to merge with St. Cloud (Minn.) Medical Group under a settlement that the agency said would mitigate likely anticompetitive effects of the deal.
In a statement Thursday, the FTC said it will require St. Cloud-based CentraCare Health to release some physicians from noncompete contract clauses, allowing them to work for competing practices or establish new practices in the area and to provide financial incentives to some physicians who choose to leave.
“The proposed settlement accounts for concerns regarding disruptions to patient care and possible physician shortages in the St. Cloud area,” the FTC said in the statement.
In a separate statement, CentraCare said it will begin fully integrating operations with St. Cloud Medical Group, set to be completed in two phases over the next two years.
CentraCare, a not-for-profit health system catering to central Minnesota, has six hospitals, 18 clinics, four pharmacies, and specialty services and nursing homes across the state. It employs about 270 physicians and nearly 100 advanced-practice providers, according to an FTC complaint issued this week.
St. Cloud Medical Group is a multispecialty clinic with four locations in central Minnesota and employs about 40 physicians, the complaint stated.
CentraCare's board of directors in February agreed to buy St. Cloud Medical Group in a deal that would combine the two largest providers of primary care, pediatric care and OB-GYN in St. Cloud, according to the complaint. Under the agreement, CentraCare would directly employ the St. Cloud Medical Group physicians and advanced-practice providers.
In its complaint, the FTC charged that the deal would eliminate price competition and likely allow CentraCare to increase reimbursement rates for the services of St. Cloud Medical Group physicians and score more favorable terms from health plans. The FTC also said the deal would reduce CentraCare's incentive to offer high-quality care and services.
But the St. Cloud Medical Group is failing financially and some of its physicians plan to leave the practice and possibly the area if the group doesn't merge with CentraCare, the FTC said. That could reduce the group's “competitive significance,” disrupt care and lead to physician shortages, Commissioner Maureen K. Ohlhausen said in a concurring statement issued Thursday.
St. Cloud Medical Group was unable to find another buyer, though another local provider is interested in hiring some of the medical group's physicians, the FTC said.
The proposed consent agreement would suspend enforcement of noncompete provisions against St. Cloud Medical Group adult primary care, pediatric or OB-GYN doctors to allow up to 15 physicians to leave for other local practices. The agreement also supports the development of new practices by requiring CentraCare to provide $100,000 “departure payments” to the first five doctors who leave to create a new practice or join a smaller one in St. Cloud, the FTC said in an analysis of the consent agreement.
The FTC voted 3-0 to issue the complaint and accept the proposed consent order for public comment. The consent agreement will be subject to public comment for 30 days, and the agency will then decide whether to make it final.