FTC Order Will Restore Competition for Adult Cardiology Services in Reno, Nevada

Renown Health, the largest provider of acute care hospital services in northern Nevada, will release its staff cardiologists from "non-compete" contract clauses, allowing up to 10 of them to join competing cardiology practices. Renown Health has agreed to settle Federal Trade Commission charges that its recent acquisitions of two local cardiology groups reduced competition for the provision of adult cardiology services in the Reno area.

Renown Health, based in Reno, Nevada, operates general acute care hospitals and commercial health plans serving the Reno area. Before the recent acquisitions, virtually all of the cardiologists in the Reno area were affiliated with two medical groups – Sierra Nevada Cardiology Associates (SNCA) and Reno Heart Physicians (RHP).

In late 2010, Renown Health agreed to acquire SNCA's medical practice and hire its 15 cardiologists practicing in the Reno area. Before this, Renown Health did not employ any cardiologists, and the acquisition positioned it as a direct competitor of RHP. In March 2011, Renown Health acquired RHP and hired its 16 Reno-area cardiologists. According to the FTC's complaint, other than the physicians associated with SNCA and RHP, there are very few cardiologists practicing in the Reno area. Accordingly, the FTC alleged, competition for adult cardiology services was effectively eliminated.

In addition, the contracts between Renown Health and the newly hired cardiologists included "non-compete" provisions, which effectively prevented them from joining medical practices that competed with Renown Health. As a result of the acquisitions and non-compete clauses, the FTC contends, Renown Health currently employs 88 percent of the cardiologists in the Reno area.

According to the FTC's complaint, Renown Health's acquisitions of SNCA's and RHP's medical practices created a highly concentrated market for the provision of adult cardiology services in the Reno area, in violation of federal law. The complaint alleges that the consolidation of the competing practices into a single cardiology group controlled by Renown Health led to the elimination of competition based on price, quality, and other terms. In addition, according to the complaint, the consolidation increased the bargaining power that Renown Health has with insurers, and this may lead to higher prices for adult cardiology services in the Reno area.

The proposed order settling the FTC's charges is designed to remedy the anticompetitive effects of Renown Health's acquisitions of SNCA and RHP, and to restore competition for cardiology services in the Reno area. Renown Health has agreed to an order temporarily suspending the non-compete provisions currently in place with its cardiologists. During this time, the former SNCA and RHP cardiologists now working for Renown Health will be able to seek other employment, including positions with other hospitals in the Reno area.

Under the proposed order, the non-compete provisions will be suspended for at least 30 days while the FTC considers public comments it receives on the order. During this time, former SNCA and RHP cardiologists may contact other employers about leaving Renown Health, and will notify a special monitor appointed by the FTC to ensure they are included in a group of up to 10 cardiologists that will be allowed to join competing groups. After the FTC finalizes the consent order, another 30-day release period will begin, during which other cardiologists may leave Renown Health, provided certain conditions are met, including the requirement that they intend to continue to practice in the Reno area for at least one year.

At any time during this period, Renown Health can ask the FTC to end the release order if 10 of its cardiologists have left for competing practices. If fewer than six cardiologists have decided to leave Renown Health after the end of this release period, Renown Health will continue to suspend the non-compete provisions until at least six cardiologists have accepted offers with competing practices in the Reno area.

The State of Nevada, through its Attorney General, worked with FTC staff to investigate and resolve this matter. The Attorney General has filed a complaint similar to the FTC's and has entered into an agreement with Renown Health similar to the FTC's proposed settlement. The state agreement is subject to court approval.

The Commission vote to accept the consent agreement package containing the proposed consent order for public comment was 5-0. The FTC will publish a description of 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 September 5, 2012, after which the Commission will decide whether to make the proposed consent order final.

Interested parties can submit written comments electronically or in paper form by following the instructions in the "Invitation To Comment" part of the "Supplementary Information" section. Comments can be submitted electronically by clicking here. Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

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. The complaint is not a finding or ruling that the respondent has actually violated the law. A consent order is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. 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 $16,000.

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