Healthcare Provider in St. Cloud, MN Settles FTC Charges That Its Acquisition of Rival Provider Would Likely Lessen Competition for Certain Physician Services

The Federal Trade Commission will require CentraCare Health, a healthcare provider in St. Cloud, Minnesota, to release some physicians from “non-compete” contract clauses, allowing them to join competing practices, under a settlement mitigating likely anticompetitive effects from CentraCare’s proposed merger with St. Cloud Medical Group (“SCMG”).

CentraCare Health is a non-profit health system in central Minnesota that includes a multi-specialty physician practice group. SCMG is a physician-owned, multi-specialty practice group that operates four clinics in and around St. Cloud. CentraCare’s planned acquisition of SCMG would combine the two largest providers of adult primary care, pediatric, and OB/GYN services in the St. Cloud area.

By eliminating SCMG as a potential alternative in the St. Cloud area, the acquisition is likely to increase CentraCare’s bargaining power vis-à-vis commercial health plans, allowing it to raise reimbursement rates and secure more favorable terms, the complaint states. The acquisition may also result in a loss of quality and service benefits to patients.

However, SCMG is failing financially, has lost its sole remaining line of credit, and appears unlikely to improve its financial condition. Also, a number of physicians have already left the practice and others are likely to depart – and may leave the St. Cloud area altogether – if the merger does not close. SCMG’s multi-year search did not identify an alternative purchaser to CentraCare for the entire group, but at least one local provider has expressed interest in expanding its practice by hiring some of SCMG’s physicians.

The proposed settlement accounts for concerns regarding disruptions to patient care and possible physician shortages in the St. Cloud area. The proposed consent order will permit the acquisition to proceed, but lessens its potential anticompetitive effects by requiring CentraCare to allow a number of adult primary care, pediatric, and OB/GYN physicians to leave the health system and work for other local providers or establish a new practice in the area and to provide certain financial incentives to a number of departing physicians.

Details about the case are set forth in the analysis to aid public comment for this matter. The Commission vote to issue the complaint and accept the proposed consent order for public comment was 3-0 with Commissioner Maureen K. Ohlhausen issuing a concurring statement.

The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through Nov. 7, 2016, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $40,000.

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