A big heart
Acquisition of practices draws antitrust scrutiny
Aproposed Federal Trade Commission agreement with a marketdominating cardiology group may be the first of its kind and the first of similar actions to come. “It’s the first time we’ve taken any type of law-enforcement action in respect to a physician merger,” said John Wiegand, an antitrust attorney in the FTC’s San Francisco office who worked on the case involving Renown Health’s acquisitions of the only cardiology groups in the city of Reno, Nev.
The FTC had charged that the Reno-based health system, through the acquisitions, had gained too much control of the market for cardiology services in the region. In its proposed agreement with the FTC, Renown did not admit any wrongdoing but agreed to release as many as 10 cardiologists from noncompete contracts.
Wiegand said that nothing about the case made it a model for future actions and that the office wasn’t “looking for a poster child,” but acknowledged that more consolidation cases are likely.
“There have been a number of investigations into physician consolidation,” Wiegand said (June 9, p. 6). “The number, from my perspective, appears to be accelerating because physician consolidation is accelerating.”
Renown acquired Sierra Nevada Cardiology Associates in November 2010 and hired 15 of its cardiologists in the process. In March 2011, Renown purchased Reno Heart Physicians and hired 17 of Reno Heart’s cardiologists. This resulted in an eventual control of 88% of the cardiologist market in the region, which includes Reno, with almost 230,000 people, and the city of Sparks, with a population of about 91,000.
Once employed, the physicians were barred from competing with Renown for two years, and if they violated the noncompete terms, they were subject to a $150,000 penalty and one year’s salary or $750,000—whichever was greater.
Andy Pearl, Renown’s vice president of system development, said in a statement the practices had approached Renown, and the goal of arrangements is “to enhance quality, improve services and retain physicians in our community.”
If the FTC finalizes the proposed agreement, published in the Aug. 10 Federal Register, a 30-day “release period” will begin, with doctors free to seek other employment under certain conditions, such as staying in Reno for at least a year. If, after the release period ends, fewer than six cardiologists have left Renown, the noncompete clauses remain in suspension until at least six cardiologists leave.
Wiegand said that in Renown’s acquisition of the two practices, the cardiologists were considered assets. He noted that in other industries, companies often are acquired “for the brainpower of the people working there,” not necessarily for physical assets. But whether the intent is to acquire intellectual or physical assets, he said, consolidation of competing businesses can lead to a lack of competition, and it’s this competition that leads to lower costs and more choice.
“Remedies are difficult when the asset is human capital,” he said. “This is minimally invasive ... We’re trying to get consumers enjoying the benefits of competition that existed before the mergers took place.”
Renown acquired the only cardiology groups in Reno, drawing the FTC’s attention.