Washington state has filed an antitrust lawsuit against DaVita Inc. and Fresenius Medical Care, accusing the two largest U.S. dialysis providers of using restrictive physician agreements to protect their market positions and limit competition in kidney care services.
The lawsuit, filed Tuesday in Thurston County Superior Court, alleges that the companies required nephrologists serving as medical directors to enter into noncompete agreements that prevented them from working with rival dialysis facilities in the same geographic areas, according to Reuters reporting published November 10.
Washington Attorney General Nick Brown contends that the restrictions have made it more difficult for competing dialysis operators to establish new treatment centers, potentially reducing access to care for patients with advanced kidney disease.
The case represents another legal challenge to employment restrictions in the U.S. healthcare industry, where regulators have increasingly scrutinized contractual arrangements that may discourage competition or restrict professional mobility.
Physician Agreements at Center of Dispute
The state’s allegations focus on agreements involving nephrologists, physicians who specialize in treating kidney disorders and who frequently serve as medical directors at dialysis facilities.
Federal Medicare regulations require dialysis centers to have medical directors responsible for overseeing clinical standards and patient safety.
According to Reuters, Washington alleges that DaVita and Fresenius used contractual restrictions to limit the availability of these specialists to competing operators, creating barriers for companies seeking to establish or expand dialysis services.
State officials argue that the agreements have broader consequences than restricting physicians’ employment opportunities. By limiting competition, the arrangements allegedly weaken incentives for providers to improve treatment quality, introduce new services and expand patient access.
The Washington attorney general’s office also alleges that certain restrictions extended beyond individual physicians to their medical practices, potentially preventing other nephrologists in those practices from working with competing dialysis operators.
Market Dominance Raises Competition Concerns
DaVita operates 51 dialysis centers in Washington, while Fresenius operates 29, according to figures cited by Attorney General Brown and reported by Reuters.
Some regions of the state have only one dialysis provider, a situation Washington officials argue can leave patients with limited alternatives for essential medical treatment.
Dialysis removes waste products and excess fluid from the blood when a patient’s kidneys can no longer perform those functions adequately. Patients receiving conventional in-center treatment generally require multiple sessions each week.
Washington officials estimate that approximately 9,000 state residents receive dialysis treatment, according to the attorney general’s office.
The lawsuit alleges that the companies’ contractual practices have helped preserve their positions in markets where patients already face limited choices.
The state further argues that restrictions on medical directors can discourage alternative providers from entering local markets, including companies offering home-based dialysis services.
Such services may provide greater flexibility for eligible patients who would otherwise need to travel regularly to treatment facilities.
DaVita Rejects Allegations
DaVita disputed the state’s characterization of its physician relationships and said it intends to defend its business practices.
In a statement reported by Reuters, the Denver-based company described the allegations as presenting a distorted account of its medical director agreements and the physicians working under those arrangements.
DaVita maintained that its longstanding relationships with independent medical practices are lawful and said it would vigorously contest the claims.
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Fresenius, the German healthcare company, did not immediately respond to Reuters’ request for comment.
The allegations remain unproven, and the lawsuit does not establish that either company violated competition laws.
Federal Investigation Adds Regulatory Pressure
The Washington lawsuit follows an earlier federal investigation into similar physician agreements involving the two dialysis providers.
According to Reuters, the Federal Trade Commission began examining the companies’ use of medical director noncompete provisions in April 2024.
The investigation covers agreements dating back to January 2016, with federal regulators issuing civil investigative demands seeking information from both companies.
DaVita and Fresenius have disclosed that they are cooperating with the FTC investigation, Reuters reported.
The state lawsuit adds another layer of legal scrutiny to the companies’ physician contracting practices, although the Washington proceedings and federal investigation are separate matters.
DaVita also has a prominent institutional shareholder in Berkshire Hathaway, which holds approximately 45% of the company’s shares, according to Reuters.
Washington Seeks Penalties and Contract Changes
Washington’s complaint alleges violations of the state’s Consumer Protection Act and Noncompetition Covenants Act, which restricts the enforceability of certain agreements limiting workers’ ability to pursue other professional opportunities.
The state is asking the court to invalidate the challenged noncompete provisions covering current and former medical directors.
It also seeks civil penalties of up to $7,500 for each violation, according to Reuters.
Source: Reuters
