Tuesday, July 28, 2009
FTC questions buys by Carilion
The federal agency wants to undo the sale of two medical centers to maintain competition.
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The Federal Trade Commission is not attempting to undo Carilion Clinic's conversion to a clinic system, but the government would likely seek to prevent Carilion from acquiring physician practices in neurology and orthopedics.
In an administrative complaint filed Friday, the FTC suggested that Carilion violated antitrust laws by purchasing the Center for Advanced Imaging and the Center for Surgical Excellence in August. The joint purchase, the government argues, has stifled competition in imaging and outpatient surgical services -- leaving Roanoke patients in jeopardy of paying higher prices and receiving poorer care.
The FTC wants the sale undone so the two companies are returned to the marketplace as independent centers and competitors of Carilion. But in order to do that, other practices acquired previously or in the meantime by Carilion also may have to be divested.
"This is not a challenge to the Carilion model itself," said Paul Nolan, an FTC lawyer involved with the recently filed complaint against Carilion. "It's just that there may be certain practices that have been a vital source of support to the competing MRI unit."
Christopher Sprigman, a law professor at the University of Virginia who focuses on antitrust issues, said the move is typical in antitrust cases.
"If you release them into a barren landscape, they starve. They need to be fed," Sprigman said of divesting the two centers. "They [the FTC] want this merger to be stopped and they want whatever else to happen for these competitors, CAI and CSE, to remain viable."
The FTC action comes three years into Carilion's transition from a traditional hospital system to a clinic model, where Carilion employs multiple specialist and primary care groups in addition to running hospitals. In converting to a clinic, Carilion has built its employed medical staff to about 500 physicians, and has said it will continue to add physicians as needs are identified.
Carilion spokesman Eric Earnhart said the FTC complaint would not harm Carilion's conversion to the clinic.
Nolan specifically pointed to local specialists in neurology and orthopedics as medical practices that may need to remain independent of Carilion.
Doctors in neurology and orthopedics frequently refer patients for imaging scans using CT and MRI technologies, two services that are a staple at the Center for Advanced Imaging.
"We would want the judge to look at that to see if certain practices were acquired close in time and were related to the successful business of the independent CAI," Nolan said. "They may not have yet been acquired, but were probably on the list."
Carilion had been in negotiations to acquire Roanoke Neurological Associates. Those discussions fell through nearly two months ago when the practice said it would remain independent and stop treating adult patients at Carilion Roanoke Memorial Hospital.
Nolan said the FTC was interested in Roanoke orthopedic and neurology groups that had previously sought state permission to operate their own MRI machines.
In May 2006, the state denied Roanoke Neurological Associates its request to spend nearly $1.6 million to add MRI services. Then, in November 2006, the state denied Roanoke Orthopaedic Center a similar request to add a specialized center for MRI services.
A call to Roanoke Orthopaedic Center seeking comment about a potential deal with Carilion was not returned.
Earnhart said the nonprofit hospital never comments on discussions with private physician groups.
Earnhart declined to offer additional insight into Carilion's response to the FTC allegations, saying Carilion continues to review the complaint.
UVa's Sprigman said the complaint does raise several areas for Carilion to challenge because key facts are not sourced or given.
"For all I know it is a really great case, but from the complaint it is really difficult to tell," he said, adding that the complaint only has to make the case to bring the charges, not reveal everything.
He specifically questioned how the government determined the geographic market of 15 to 20 miles around Roanoke and Salem for measuring competition.
Sprigman also said the case involving the surgical center is unusual. While the competition between Carilion and the imaging center was established, that wasn't the case with the surgical center. In fact, the surgical center had just received accreditation through Medicare prior to the sale. That means it was just beginning to ramp up business.
"I'd be shocked if Carilion doesn't say this is speculative," Sprigman said. "Because the data isn't there, they can argue that, 'For all we know, we bought a dud.' "
Nolan, the FTC's lawyer, said that the former owner of both centers "was very assertive and aggressive in the marketplace to make the most of them."
