FTC: Hospital Must Release Cardiologists from Non-Competes

A major hospital chain must release a group of physicians from their non-compete agreements.

The Federal Trade Commission (FTC) announced its settlement with Renown Health, the largest hospital system in northern Nevada, after the company merged several competing cardiology practices. Physicians were asked to sign non-compete contracts, if they had not already, before joining the hospital system.

Non-competes limit competition among rural health care providers, said the FTC, which would hurt consumers and increase the cost of health care for the region.

Following the merger, the FTC filed a complaint alleging antitrust violations.

Renown Health settled by releasing ten (10) cardiologists from their non-compete contracts in order to join competing practices. The FTC was particularly concerned that the anticompetitive contracts would limit the market for adult cardiology services and drive up the cost to patients.

The American Medical Association has previously stated that physician non-compete contracts “disrupt continuity of care, and potentially deprive the public of medical services.” (AMA E -9.02). Further, “restrictive covenants are unethical if they are excessive in geographic scope or duration in the circumstances presented, or if they fail to make reasonable accommodation of patients’ choice of physician.”

In addition to antitrust concerns, Virginia courts have said non-compete agreements among doctors must be narrowly drawn. Otherwise, the agreements are too broad and unenforceable as a matter of law.

Bottom Line: Following the wave of health care consolidation in the last 10 years, driven mainly by cost considerations, hospital systems must now consider antitrust implications when merging competing practice groups. As a result, hospitals face increasing scrutiny from the FTC, including in Southwest Virginia.