Renown Health, based in Reno, Nevada, operates general acute care hospitals and commercial health plans serving the Reno area and is the largest provider of acute care hospital services in northern Nevada. At the end of 2010, Renown Health acquired one of the two cardiology medical practices in the Reno market and hired its 15 cardiologists that practice adult cardiology in the Reno area. In March, 2011, Renown Health acquired the other cardiology medical practice and hired its 16 Reno-area cardiologists. Prior to these two acquisitions, Renown Health did not employ any cardiologists.

According to the allegations in a complaint filed by the Federal Trade Commission staff on August 3, 2012, there are very few cardiologists practicing in the Reno area independent of the 31 cardiologists now employed by Renown Health. The FTC alleges that competition for adult cardiology services is effectively eliminated by these acquisitions.

As a result of the acquisitions, the FTC alleges that Renown Health employs approximately 88 percent of the cardiologists in the Reno market. The contracts between Renown Health and the newly hired cardiologists include “non compete” provisions, which effectively prevent the hired cardiologists from joining competing medical practices. The FTC complaint alleges that the consolidation of the competing practices into a single cardiology group controlled by Renown Health leads to the elimination of competition based on price, quality and other terms and increases the bargaining power that Renown Health has with insurers such that it may lead to higher prices for adult cardiology in the Reno market.

The FTC charges that Renown Health violated §7 of the Clayton Act, 15 U.S.C. §18, by substantially lessening competition in the market for adult cardiology services in and around Reno, Nevada. The State of Nevada, through its Attorney General, has made similar allegations in a state action.

Renown Health has agreed to a proposed Consent Order that would resolve the FTC’s charges. A similar resolution was reached with the Nevada Attorney General.

The proposed FTC Consent Order requires that, during a “release period,” the non-compete provisions in the contracts of the employed cardiologists are to be suspended to provide an opportunity for any of the employed cardiologists to confidentially explore other employment and professional opportunities in the Reno market, including with other hospitals or competing medical practice groups.

The release period includes the initial 30-day period while the FTC receives public comments regarding the proposed Consent Order. After the 30-day period for public comments, and after the FTC finalizes the Consent Order, another 30-day release period will begin, during which other cardiologists may leave Renown Health for competing practices in the Reno Market.

As part of this process, the cardiologists are to confidentially notify a designated independent “Monitor” of their interest and/or commitment to leave for a competing practice in the Reno area. Renown Health is prohibited from interfering with the cardiologists’ employment discussions and from enforcing the provisions in their contracts prohibiting such activities. Renown Health is also required to timely notify the cardiologists of this agreed-to process.

If at any time during the release period 10 of its cardiologists indicate that they would leave for competing practices, Renown Health can ask to end the release requirement and re-implement the non-compete provisions as to the remaining cardiologists. If fewer than 6 cardiologists have indicated that they will leave Renown Health after the end of the release period, Renown Health will be required to continue to suspend the non-compete provisions until at least 6 cardiologists have accepted offers with competing practices in the Reno market.

If 10 cardiologists leave for competing practices, that would reduce the percentage of cardiologists employed by Renown Health to approximately 60% of the adult cardiology market. If only 6 cardiologists leave for competing practices, the percentage of cardiologists employed by Renown Health would be approximately 71% of the cardiologists in the market.

This action by the FTC and the State of Nevada is a reminder that the federal enforcement agencies, as well as state antitrust enforcement agencies, may review any consolidation of health care services in a particular geographic market that creates a concentration of a particular health care service. The amount of concentration that might be considered anticompetitive will likely vary from market to market and from health care service to health care service. However, in a situation similar to the Renown Health circumstances, where approximately 88 percent of adult cardiology services was controlled by one health care entity, an enforcement agency is likely to consider such concentration as creating an anticompetitive market for that particular health care service.

The docket for this FTC matter can be found on the FTC website.