Dialysis service provider with history of fueling consolidation must seek FTC approval prior to any new deals; Agency policy statement confirms return of prior approval as standard practice
The Federal Trade Commission issued a proposed order imposing strict limits on future mergers by DaVita, Inc., a dialysis service provider with a history of fueling consolidation in life-saving health industries. The order follows allegations that DaVita’s proposed acquisition of the University of Utah Health’s dialysis clinics would reduce competition in vital outpatient dialysis services in the Provo, Utah market. Under the proposed order, DaVita is required to divest three Provo-area dialysis clinics to Sanderling Renal Services, Inc. and prohibited from entering into or enforcing non-compete agreements and other employee restrictions. The FTC investigated this case in collaboration with the Utah Attorney General’s Office.
“DaVita has a history of attempting to buy up competing dialysis clinics in an industry that is already highly concentrated, in large part due to the acquisition activity of DaVita and other large dialysis clinic chains,” said Bureau of Competition Director Holly Vedova. “This is a big concern, and it is compounded by the fact that the limited number of nephrologists available to work at the clinics creates an opportunity for anticompetitive restrictions on labor. To address these concerns, the Commission’s order includes important provisions that guard against restrictions on worker mobility and protect Utah consumers from other anticompetitive practices in this critical, life-saving health care market.”
The proposed order limiting future transactions marks the FTC’s return to the standard use of prior approval. It was accompanied by the announcement of the agency’s new Prior Approval Policy Statement putting industry on notice that the FTC’s orders will once again routinely require prior approval for future transactions affecting each relevant market for which a violation was alleged, for a minimum of ten years. These actions build upon the FTC’s rescission of a decades-old policy that curtailed what used to be a long-established practice of requiring merging parties subject to a Commission order to obtain prior approval.
According to the FTC’s complaint, there are only three providers of outpatient dialysis services patients in the greater Provo, Utah area, and the acquisition would eliminate actual, direct, and substantial competition between dialysis clinics owned by DaVita and dialysis clinics owned by the University of Utah Health, and would tend to create a monopoly. According to the complaint, entry of new competitors in the greater Provo area is not likely, timely, nor sufficient to remedy the effects of the proposed acquisition. This could have life-threatening impacts on patients receiving dialysis services, especially those with end-stage renal disease, which is characterized by a near total loss of kidney function. Many patients with this condition cannot receive home dialysis, and because these patients often have multiple health problems, they cannot or will not travel more than 30 minutes or 30 miles for in-clinic dialysis treatment.
Under the proposed order, in addition to divesting three Provo-area dialysis clinics and providing transition services for up to one year, DaVita is prohibited from: entering into or enforcing, directly or indirectly, any non-compete agreements with physicians employed by the University that would restrict their ability to work at a clinic operated by a competitor of DaVita (except to prevent a medical director under a contract with DaVita from simultaneously serving as a medical director at a clinic operated by a competitor); entering into any agreement that restricts Sanderling from soliciting DaVita’s employees for hire; and directly soliciting patients who receive services from the divested clinics for two years.
Importantly, under the order, DaVita is also required to receive prior approval from the FTC before acquiring any new ownership interest in a dialysis clinic anywhere in Utah for a period of ten years. This critical tool will help the Commission quickly identify and ultimately prevent future facially anticompetitive deals by DaVita, a particularly acquisitive company. Notably, today’s order extends the coverage of the prior approval beyond the markets directly impacted by this merger. This order requires the use of a broad prior approval provision for a variety of reasons, including DaVita’s history of fueling market consolidation for these life-saving services. The analysis to aid public comment provides additional details about the consent order.
The FTC appreciates the collaboration of the Utah Attorney General’s Office in investigating this case.
The Commission vote to accept the proposed consent order for public comment was 5-0. Commissioner Christine S. Wilson issued a concurring statement. The FTC will publish the consent agreement package in the Federal Register shortly. Instructions for filing comments appear in the published notice. Comments must be received 30 days after publication in the Federal Register. Once processed, comments will be posted on Regulations.gov.
NOTE: When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $43,792.