At a meeting in July, the president of Trinity Health Saint Mary’s told executives from Orthopaedic Associates of Michigan that the Grand Rapids hospital planned to hire its own orthopedic surgeons rather than rely on Orthopaedic Associates for on-call services.
The private orthopedic practice had raised its daily rate from $1,400 to $2,300 and failed “to cooperate with the hospital,” according to a complaint filed Tuesday in federal court by the hospital’s parent company, Trinity Health – Michigan.
Dr. Kenneth Easton, the president of Orthopaedic Associates of Michigan, was “furious,” the complaint said, “alarmed at the prospect of facing additional competition in the market” and slammed his hand on the table.
“He indicated that if Saint Mary’s took that step, [Orthopaedic Associates of Michigan] would cease providing on-call services at Saint Mary’s and would cease working with Saint Mary’s on its orthopedic residency program,” the complaint said.
The catch is that the four surgeons Trinity wants to hire work for Orthopaedic Associates of Michigan, the largest orthopedic practice in the region, and have signed noncompete agreements that would require them to wait a year before taking jobs at St. Mary’s.
Enforcement of the noncompete agreements “would devastate Saint Mary’s orthopedic program,” the complaint said.
The lawsuit asks the U.S. District Court for the Western District of Michigan to declare the contracts unenforceable and order Orthopaedic Associates to pay damages for the costs incurred due to what Trinity characterizes as “anticompetitive practices.”
Orthopaedic Associates of Michigan’s Chief Operating Officer Lisa Pearson said that, after consultation with an attorney, “we are not going to comment on this ongoing litigation.
Attorneys for Trinity Health – Michigan declined to answer questions about the lawsuit but a statement released by Trinity said, in part, that " We were 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.”
The lawsuit cites 19th century antitrust law, but it’s also in tune with a recent shift in the federal government’s thinking when it comes to noncompete clauses. A rule proposed last month by the Federal Trade Commission would prohibit such agreements entirely.
“Research has shown the use of non-compete clauses by employers has negatively affected competition in labor markets, resulting in reduced wages for workers across the labor force,” the agency wrote.
The Commission estimates that banning noncompete agreements in health care would reduce costs by more than $140 billion a year.
According to Trinity’s complaint, doctors from a practice called River Valley Orthopedics have traditionally provided “virtually all” of the orthopedic care at St. Mary’s. That practice was acquired by Orthopaedic Associates in 2018.
But Orthopaedic Associates was “highly inefficient,” and its owners were “unable to work well with St. Mary’s,” the complaint said, which led all of the former River Valley Orthopedics doctors to either retire, quit or announce their intention to.
It is four of those doctors – Dr. Timothy Henne, Dr. Timothy Lenters, Dr. Jack Healey and Dr. Geoffrey Sandman – that Trinity is seeking to hire. It says it offered to pay Orthopaedic Associates to release the doctors from their noncompete contracts, but the offer was rejected.
Those four doctors perform the majority of orthopedic surgeries at St. Mary’s, and the complaint argued that enforcement of the noncompete contracts would “dramatically reduce Saint Mary’s ability to provide orthopedic surgery,” effectively destroy the hospital’s orthopedic surgery residency program and, without orthopedic surgery residents, make it hard to hire new surgeons.
Further, it said, Orthopaedic Associates’ decisions to cancel the on-call contract, not to support the residency program and its reduction in the number of spine surgeries it performs at St. Mary’s were contrary its own self-interest and “made sense only as an effort to harm [Trinity Health – Michigan] and stifle its competition in the professional orthopedic services market,” the complaint said.
Orthopaedic Associates already controls 64 percent of that market in Kent County, which Trinity characterized as “monopoly power,” arguing that it would be in the public interest to promote greater competition.
Trinity says it has already suffered millions of dollars in losses due to Orthopaedic Associates’ actions. It is asking the court to impose damages equal to three times those losses.