Continuing a recent trend by antitrust enforcement authorities, on Monday the Federal Trade Commission ("FTC") and Nevada Attorney General announced proposed consent decrees settling litigation filed against Reno, Nevada’s largest hospital provider, Renown Health, relating to its recent acquisitions of two cardiology physician groups. The announcement illustrates government agencies’ renewed commitment to scrutinize healthcare transactions that might limit or eliminate competition among healthcare providers, seemingly regardless of size or reportability under the Hart-Scott-Rodino Act.

Renown Health operates general acute care hospitals and commercial health plans in the Reno area. Beginning in late 2010, Renown acquired one of two large cardiology groups in the Reno area consisting of 15 cardiologists. Less than a year later, Renown acquired the other cardiology group comprising another 17 doctors, allegedly resulting in Renown controlling 88 percent of Reno area cardiologists at the time of this litigation. The FTC called them the only significant cardiology groups in that area. In addition, Renown required the cardiologists to sign non-compete agreements to prevent them from leaving and joining competing practices. The antitrust enforcers claimed that the acquisitions and contracting practices effectively eliminated competition for adult cardiology services in that market.

Rather than seeking more traditional "structural remedies" such as requiring divestitures of the group practices or the sale of certain Renown assets, the FTC consent decree (and similar Nevada AG order) requires Renown to suspend its non-compete agreements for 30 days while the consent decree is open for public comment; during that time, the cardiologists are free to seek employment elsewhere. Up to 10 cardiologists can leave Renown without penalty. If the consent decree is approved by the FTC, the non-compete provisions will be suspended for an additional 30-day period. If 10 cardiologists have left at any time during this latter period, Renown can request reinstatement of its non-compete agreements. The suspensions will remain in place beyond the 30-day periods until at least six cardiologists have secured employment elsewhere. Among additional remedies, Renown must provide advance notice of future cardiology-related acquisitions and must reimburse investigation expenses incurred by taxpayers.

The Renown investigation, litigation and resolution is not the first of its kind. Other state attorneys general, including those in Maine and Pennsylvania, recently have challenged physician provider consolidations both prior to and after consummation that also ultimately resulted in conduct-based, rather than structural, remedies.

What’s Next

Although larger hospital system mergers typically have garnered the most attention from government agencies, it is clear that there is a new commitment by the government to investigate and litigate any form of provider consolidation that could potentially harm competition in the provider market. Hospitals, health systems and other providers who are contemplating physician practice acquisitions, mergers or other forms of provider consolidation should fully consider the potential antitrust risks and consequences in evaluating these transactions.