A big heart

Ac­qui­si­tion of prac­tices draws an­titrust scru­tiny

Modern Healthcare - - THE WEEK - An­dis Robeznieks

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.

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