When merging medical practices, watch out for the antitrust regulators

The Federal Trade Commission reported last week that a Pennsylvania orthopedic group formed from six independent practices has resolved claims that the merger, which gave the company a 76 percent market share in Berks County, was anti-competitive.  Under the consent agreement, Keystone Orthopaedic Specialists LLC and Orthopaedic Associates of Reading Ltd., which split from Keystone in 2014, must get the commission’s approval for the next decade before purchasing any interests in each other, picking up another local orthopedic practice or hiring an orthopedist who has worked in the county in the last year.

According to a decision detailing the agreement, the purpose of the provisions on acquiring outside practices or doctors “is to ensure competition among orthopedists to enter into contracts with payors for the provision of orthopedic services in Berks County, Pennsylvania, and to remedy the lessening of competition alleged in the commission’s complaint.” The FTC’s complaint had alleged that the 2011 merger fused 19 of the 25 orthopedists in Berks County into one practice, allowing Keystone to single-handedly drive up prices for medical services in the area. These increased costs are passed on to employers and ultimately patients through higher premiums and co-payments, according to the complaint.

By creating a virtual monopoly, the merger also served to reduce incentives to maintain or exceed service and quality in the county’s orthopedic sector.  In the four years since the merger, the practice has not created benefits — such as the more efficient use of assets — sufficient enough to outweigh the drawbacks, nor will new practices likely be enough to counter the anti-competitive effects, the commission said. The FTC also pointed out that recruiting new orthopedists to the area is not an easy, cheap or quick process. As a result, the practices have violated the Clayton Act and the FTC Act, the complaint said.

The commission noted that six orthopedists left Keystone in 2014 and resumed doing business as Orthopaedic Associates, which caused the larger company’s market concentration to decrease. As such, the FTC said in a document analyzing the agreement that it will not seek further structural changes in the companies.  However, the commission said, the settlement is meant to preserve the separation between the two entities, explaining that a merger between the practices would raise further antitrust concerns.  The settlement also bars the practices from actions such as conspiring with other local orthopedists to coordinate pricing or to refuse to deal with certain payors. Additionally, health plans have the option to renegotiate contracts with the practices without penalty, according to the decision.

The case is In the Matter of Keystone Orthopaedic Specialists LLC et al., case number 1410025, before the U.S. Federal Trade Commission. You can find more information at:

https://www.ftc.gov/system/files/documents/cases/151015keystoneanalysis.pdf

 


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