Last week, the Federal Trade Commission issued a final decision approving a consent order that will invalidate the non-compete agreements of ten cardiologists who are terminating their employment with Renown Health in Reno, Nevada. The move has been expected since late this summer, when the parties reached a tentative agreement on the matter.
The situation arose out of Renown Health’s acquisition of competitors Reno Heart Physicians and Sierra Nevada Cardiology Associates. Upon Renown’s acquisition of these two competitors, cardiologists at those two health systems immediately became subject to Renown’s aggressive non-compete agreements. As a result of that acquisition, Renown – at one time – had locked up better than 97% of the Reno market in cardiologists. Presently, the company maintains a market share of 88%. Concerned that Renown’s strong monopoly position could destroy competition on price and quality, the FTC stepped in. The case raises a number of interesting considerations.
We are witnessing – and will continue to see – a trend toward consolidation of hospitals and health systems. Both economic and policy factors (like the Affordable Care Act) are driving this trend. Although such consolidation may yield certain efficiencies, these mergers also give rise to concerns regarding competition. Competition-related concerns are even more pronounced when such consolidations involve restrictive covenants. The Renown scenario provides an excellent example: When a dominant firm like Renown rules the market and has hundreds of medical professional locked into non-compete agreements, the threat to competition is clear. Doctors cannot leave the dominant firm to work for rivals. If they leave the dominant firm, they must exit the market altogether. In rural or underserved markets, these concerns are particularly acute. It was these types of concerns that lead the FTC to intervene in the Renown Health matter.
This may represent an isolated instance of intervention. Alternatively, it may signal a trend toward the FTC, DOJ and states’ attorneys general more aggressively policing competition in the healthcare marketplace. Regardless of what happens in terms of antitrust and competition enforcement – or state house policy for that matter – litigants should be cognizant of the importance of market concentration in non-compete litigation. This is yet another factor to add to the ledger, another reason for not enforcing a non-compete agreement, particularly in the realm of healthcare.
Jonathan Pollard is a trial lawyer and litigator based in Fort Lauderdale, Florida. He focuses his practice on cases involving employment disputes, antitrust and business torts. He represents clients in Miami, Fort Lauderdale, Boca Raton, West Palm Beach, Jupiter, Fort Myers, Tampa, and Orlando.