Non-Competes Still In Place For Dialysis Physicians

May 17, 2002
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GRAND RAPIDS — The transfer of four West Michigan kidney clinics from a Swedish company comes with the same no-compete restrictions that prevent physicians from joining any new competitors.

Beverly, Mass.-based Physicians Dialysis Inc. acquired four dialysis clinics from Gambro Healthcare of Michigan, which was forced to divest in the facilities under a deal with the state attorney general to settle claims that it used monopoly powers to quadruple its fees in West Michigan.

With the acquisition, Physicians Dialysis retained the clinics’ personnel, including their physician medical directors, and assumed non-compete agreements the physicians signed with Gambro that prohibit them from assisting in the formation of new competitors within a specified region.

“There are restrictive covenants within the geographic area of the market,” Physicians Dialysis Chief Executive Officer Patrick Ryan said.

Non-compete deals are a standard practice in the health care industry, Ryan said.

Physicians Dialysis agreed to acquire dialysis clinics in Grand Rapids, East Grand Rapids, Grand Haven and Norton Shores after being approached by Gambro, Ryan said. The West Michigan market is the right size for Physicians Dialysis because it allows for care providers and payers to become familiar with one another and forge close working relationships, he said.

“Grand Rapids represents a very exciting market to us. We like being in a marketplace where you know folks in the market sector,” Ryan said.

While Physicians Dialysis will bring prices back in line to those which existed before Gambro bought all of the kidney dialysis clinics in West Michigan four years ago, the continuation of the no-compete deals is still worrisome to the head of a health care watchdog.

Lody Zwarensteyn, president of the Alliance for Health, worries that non-compete deals enable a care provider to create a monopoly over a market and set artificially high prices, which is what Gambro was accused of doing.

“It warps the market forces,” Zwarensteyn said.

Despite those concerns, Zwarensteyn welcomes Physicians Dialysis’ entry into the market.

“It’s a least a step toward busting a structure that Gambro has set up,” he said.

Ryan said Physicians Dialysis will set “acceptable and competitive” prices and will pose new competition to Gambro’s four remaining clinics in West Michigan.

“I think the market will be a competitive market,” Ryan said. “We will complete with them on a day-to-day basis.”

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