Editor’s note: This story has been updated with comments from Orthopaedic Associates of Michigan.
GRAND RAPIDS — Trinity Health and four surgeons want a federal court to invalidate non-compete agreements with Orthopaedic Associates of Michigan, claiming they allow the market’s largest orthopedic practice to essentially hold a monopoly over procedures in Kent County.
In a federal lawsuit filed this week, Trinity Health Michigan and the surgeons assert that the non-compete agreements prohibit them from practicing at Trinity Health Grand Rapids, formerly known as Saint Mary’s Hospital. That creates alleged “monopolistic behavior by OAM, which will seriously disrupt care for patients needing orthopedic surgery in Kent County,” and cost Trinity Health Grand Rapids millions of dollars, according to court filings.
“OAM has engaged in a pattern and practice of unjustified enforcement of its noncompetition clauses to force physicians unhappy with its operations to leave Kent County, thereby significantly reducing the availability of orthopedic surgeons in Kent County and also significantly reducing competition among Kent County orthopedic surgeons and hospitals,” the plaintiffs said in the lawsuit filed Jan. 31 in U.S. District Court for the Western District of Michigan.
OAM “is by far the dominant orthopedic group in Kent County,” holding a 64-percent market share and was “formed by mergers with other orthopedic groups, thereby eliminating much of the competition in this market,” according to the lawsuit. Corewell Health Medical Group, formerly Spectrum Health Medical Group, holds a 23-percent market share and all other practices in the market hold 7 percent.
The 45-page lawsuit claims OAM has enforced non-compete agreements with the four surgeons who intend to leave the practice and work in Grand Rapids for a Trinity Health Michigan affiliate, IHA Medical Group.
OAM in a statement called the lawsuit “an unfortunate situation where one of the large health systems in the Midwest is utilizing whatever means necessary to achieve its desired business goals at the expense of one of the few independent orthopedic groups serving West Michigan.”
The four surgeons — Dr. Timothy Henne, Dr. Timothy Lenters, Dr. John Healey and Dr. Geoffrey Sandman — perform the majority of orthopedic procedures at Trinity Health Grand Rapids and became “very unhappy with OAM because of its inefficiencies, its inability to recruit physicians, the fact that it has alienated other physicians who have left and its failure to work well with Saint Mary’s,” according to the lawsuit.
Enforcement of their noncompetes would “essentially destroy these physicians’ practices and deprive their patients of care from the doctors they have chosen” and “dramatically reduce Saint Mary’s ability to provide orthopedic surgery to the many patients who seek to use that hospital and the many referring physicians (such as primary care physicians) who prefer that their patients receive surgery at Saint Mary’s,” according to the complaint.
Enforcement “would therefore seriously impede competition in the provision of hospital orthopedic services since it would dramatically weaken competition from Saint Mary’s,” Trinity Health claims in court filings.
In a statement to MiBiz, Trinity Health Michigan said it was “very reluctant to file this lawsuit, but we were unable to resolve our disputes with OAM.”
“We feel that our actions are necessary to protect our hospital, our patients, and the people of Kent County. We are committed to continue providing high quality and nationally recognized orthopedic care to all of our patients,” Trinity Health said.
However, OAM countered that “the core dispute revolves around an elaborate effort to nullify the industry-wide, common contractual obligations of physicians departing their existing practices. The remainder of the complaints in the suit are designed to leverage this core issue,” OAM said. “Medical practices and hospital systems, including Trinity, routinely enforce such provisions in their physician contracts. Historically, such provisions have been upheld and enforced by the courts. We look forward to a favorable outcome.
“OAM has and will continue to focus on providing the highest quality orthopedic care to the community it serves.”
Attorneys for Honigman LLP represent Trinity Health Michigan and IHA Medical Group. Dickinson Wright PLLC represents the four surgeons.
In July 2022, Trinity Health Grand Rapids President Matt Biersack informed his counterparts at OAM that the hospital would employ its own orthopedic surgeons “because of OAM’s failure to cooperate with the hospital,” according to court documents. OAM later notified Trinity Health Grand Rapids of plans to terminate on-call coverage for emergency orthopedic care at the hospital as of March 17, 2023. That’s the same day that the four surgeons involved in the lawsuit are set to begin working for Trinity Health Grand Rapids after leaving OAM.
OAM also decided not to support a residency program at Trinity Health Grand Rapids and significantly reduced the number of spinal surgeries performed at the hospital, according to the lawsuit. The orthopedic practice also notified Trinity Health Michigan that it was terminating Trinity’s lease at its Byron Center offices, and OAM’s staff ceased meeting with the referral coordinator at Trinity Health Grand Rapids.
The lawsuit seeks a declaratory court judgment that OAM’s non-compete contracts with the surgeons are “unenforceable and void” and violate state and federal antitrust laws. The suit also seeks compensation for damages.
As well, the lawsuit asserts that surgeons who previously worked for OAM and practiced at Trinity Health Grand Rapids left the practice because they were “dissatisfied.” Because of the non-compete agreements that barred them from working within a 50-mile radius of Grand Rapids, surgeons who had joined OAM when it acquired their River Valley Orthopedics (RVO) practice in 2018 had to leave the market and thus reduced competition, according to the lawsuit.
Trinity Health Michigan also claims that after OAM allegedly “acquired monopoly power through its merger with RVO,” it made “a number of unreasonable, monopolistic demands” that included increasing its on-call fee from $1,400 to $2,300 a day, an amount that’s “far in excess of normal on-call payments in the United States.”
Trinity Health Michigan filed the case as federal trade regulators seek public comment through March 19 on a proposed rule that would ban all non-compete agreements.
In a client briefing this week, attorneys for Dykema Gossett PLLC noted that the Federal Trade Commission justifies prohibiting non-compete agreements in health care because of the higher costs and lower physician earnings that may result. The FTC estimates that banning noncompetes would result in reducing health care spending annually by $140.8 billion.