The two largest for-profit companies that provide dialysis treatment in Washington have unlawfully imposed noncompete agreements on medical directors in their centers, blocking competition and reducing treatment options for people with kidney failure, Attorney General Nick Brown alleged in a new lawsuit.
Dialysis is a treatment to filter waste and fluid from the blood of people with kidney failure. About 9,000 people across Washington receive dialysis treatment, which usually occurs at a dialysis center three times a week for several hours at a time.
DaVita Inc. and its subsidiaries operate 51 dialysis centers across Washington. Their largest competitor, Fresenius Medical Care Holdings Inc., and its subsidiaries run 29 dialysis centers in the state.
The companies hire kidney specialists known as nephrologists to work as part-time medical directors to run their centers, as required under Medicare regulations. For years, the companies have illegally required medical directors to agree to noncompete provisions that prevent them from taking on part-time work at a competing center in the same geographic region, according to the complaint filed in Thurston County Superior Court. These noncompete provisions have made it difficult for competing dialysis centers to open, limiting treatment options for the thousands of people in Washington suffering from end-stage renal disease.
Some parts of the state have only one dialysis provider, and the use of noncompete provisions helps these companies to maintain monopolies in those regions. The lack of competition also prevents other dialysis providers from entering the market and offering in-home dialysis, which can be much more convenient for patients, according to the complaint.
“These giant, for-profit companies require doctors to sign noncompete agreements that violate Washington state law. They’re doing that to corner the market and dictate to doctors where they can and can’t work, but that leaves people with fewer options for care,” Brown said. “Our office is dedicated to protecting free and open competition so that Washingtonians can work where they want and people can get the treatment that they need.”
The companies have also applied noncompete provisions to entire medical practices, preventing a medical director’s colleagues in a nephrology practice from working for competing dialysis centers.
State law against noncompete agreements
Washington law has long protected open competition in the state Constitution and in the Consumer Protection Act.
In 2019, the Legislature passed the Noncompetition Covenants Act to more explicitly limit noncompete agreements, including for independent contractors who earn less than a certain income threshold.
The AGO alleges that DaVita and Fresenius knew about the law and in some cases, deliberately ignored it to further cement their market dominance.
The AGO alleges that the companies have entered into noncompete agreements that are void and unenforceable under the Noncompetition Covenants Act. The complaint also alleges the companies engaged in unfair methods of competition and unfair or deceptive acts or practices under the Consumer Protection Act. The AGO asks the court to throw out the noncompete agreements and award penalties for each violation.
The team handling the case for Washington includes Assistant Attorneys General Travis Kennedy, Helen Lubetkin, Christina Black, Brooke Howlett Lovrovich, and Will O’Connor, and Paralegals Michelle Oliver, Melanie Francis, and Stephanie Pawlik.
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