FTC Fashions Creative Remedy To Permit Presumptively Anticompetitive Merger For Financially Failing Medical Practice
The Federal Trade Commission (the "FTC" or "Commission") has made its preference known for structural, rather than conduct, remedies when attempting to craft consent solutions in reviewing antitrust provocative mergers. In consolidating health care provider markets, many of the antitrust sensitive transactions involve physician groups, which make structural solutions difficult where the major assets are people, physicians and other providers. The FTC has also been relatively strictacross industriesbefore accepting a failing company defense to allow an otherwise problematic merger to proceed. Yet, when the FTC faced this dynamic last week, it found an envelope-pressing consent solution to allow a physician acquisition to proceed.
The FTC entered into a proposed settlement with two Minnesota health care providers, allowing them to proceed with a planned merger that, according to the agency, combines "the two largest providers of adult primary care, pediatric, and OB/GYN services in the St. Cloud area." The Commission's willingness to accept the proposed settlement permitting CentraCare Health's ("CentraCare") acquisition of St. Cloud Medical Group P.A. ("SCMG") was "premised on the fact that SCMG is a financially failing physician practice...[and] concerns regarding disruptions to patient care and possible physician shortages." In the Matter of CentraCare Health System, FTC File No. 161-0096 (Oct. 6, 2016). The proposed settlement attempts to mitigate the likely anticompetitive effects of the combination by suspending certain non-compete agreements, facilitating the finding of alternate local employment with competing practices for former SCMG physicians, and offering financial stipends paid by CentraCare to induce some physicians to leave the merged entity. This proposed settlement is further notable for the immediate nature of certain provisions that commonly are subject to a 30-day comment period.
CentraCare is a not-for-profit health system that operates several hospitals, pharmacies, nursing homes, and multiple clinics, and employs approximately 270 physicians. SCMG is a for-profit, physician-owned practice that operates four clinics and employs approximately 40 physicians. According to the FTC, CentraCare and SCMG are the two largest providers of primary, pediatric, and OB/GYN services in the St. Cloud, Minnesota area. CentraCare entered into an agreement to acquire SCMG's medical practice on February 29, 2016.
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