The FTC hones in on dialysis noncompetes
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The Federal Trade Commission is expanding its scrutiny of the health care industry to the growing dialysis market and investigating whether dialysis giants DaVita and Fresenius Medical Care are squeezing out competitors by restricting kidney doctors from changing jobs.
Why it matters: The antitrust probe is part of a wider FTC focus on noncompete agreements that are often used in the health care labor force but that the agency says stifle business innovation.
- The stakes are especially high in dialysis, where DaVita and Fresenius control at least 70% of a market expected to be worth more than $180 billion by the next decade.
- "Easing up the noncompetes and eliminating them from these arrangements actually could create greater competition and break up the duopoly," said Daniel Frier, founding partner at law firm Frier Levitt.
Driving the news: DaVita acknowledged in a May filing with the Securities and Exchange Commission that the FTC asked for information extending back to 2016 on its use of restrictive covenants, such as noncompetes, and that it is cooperating with the investigation.
- Fresenius is aware of the inquiry and fully cooperating with the FTC, Christine Peters, the company's head of global communications, told Axios. DaVita and the FTC declined to comment.
Doctors in nephrology practices often supplement their work as medical directors at dialysis clinics. Many nephrology practices have become dependent on the extra income from these relationships, said Scott Bieber, an Idaho nephrologist.
- But broad noncompetes are commonplace.
- They may prohibit doctors from working at competing dialysis clinics in the same area for a set time period after ending employment, leaving health workers with few options other than leaving the field or relocating to change jobs.
Between the lines: Patients pay a price, too. Employment restrictions make it harder for smaller, more nimble companies to enter the dialysis market and provide at-home care that offers patients more flexibility and convenience, said Bieber, former chair of the American Society of Nephrology Quality Committee.
- "It's hard to innovate and expand this sort of new line of treatment for people in the home if everything's really consolidated and contractually locked down," he said.
Catch up quick: The FTC in April finalized a nationwide ban on noncompetes across industries, but a judge in the Northern District of Texas this month issued a narrow preliminary injunction against the policy. On Tuesday, a judge in the Eastern District of Pennsylvania refused to block the ban as litigation plays out.
- Even if the noncompete ban is permanently struck down in court, the FTC will still be able to investigate noncompete agreements at individual companies as it is doing in this case.
- Four states separately prohibit noncompetes, and additional states ban noncompetes for physicians.
The big picture: The FTC has a mixed record on intervening in the health care industry. The commission is poised to sue prescription drug middlemen over insulin prices and has started examining private equity's influence on patient care.
- But recent research linked lax FTC enforcement of hospital mergers to rising health costs.
The commission has taken aim at DaVita and Fresenius in the past, imposing limits on the companies' mergers and acquisitions.
- But physicians are skeptical the latest investigation will have much impact.
- "I don't know that anything is really going to change until we get a meaningful change in regulation," Bieber said, adding that policymakers need to take a broader look at kidney care payment as well.
Yes, but: Lawyers say this kind of probe could have teeth.
- "When they do something like this, it does come with some threat of enforcement," Brian Mead, a partner at law firm McDermott Will and Emery, said of this type of FTC investigation. "It's not just an irritation that companies easily are able to get rid of."
- The FTC's orders last year that two glass container manufacturers stop imposing noncompete agreements hints at what the agency could do in other industries, including dialysis, he said.
What to watch: The investigation also signals the FTC is pressing ahead with scrutiny of noncompetes, despite legal challenges to the commission's all-out ban announced this year.
- "This could be a signal that this is an enforcement priority for them, and they're going to continue advancing their enforcement in this area regardless of the rule," said Cody Rockey, an attorney at law firm Dykema.
