Shortly after President Joe Biden took office in 2021, he pledged that his administration would take a skeptical view of major mergers and acquisitions. When it comes to healthcare deals, that seems to be a promise kept.
The Federal Trade Commission and the Justice Department have stepped up antitrust enforcement and conducted investigations into transactions between health systems, health insurers, technology companies, and drugstore chains. However, a number of major transactions were completed during this time.
Here’s what you need to know about the Biden administration’s approach to antitrust enforcement in healthcare.
A positive stance
Healthcare consolidation has happened at a rapid pace in recent years as many companies have concluded that they cannot grow on their own. Merger and acquisition partners tout greater efficiency as a means to reduce healthcare spending, but Evidence show that These agreements lead to less competition, higher costs, lower quality, and reduced wages.
The Biden administration has made a positive approach to healthcare transactions. Biden signed an executive order in 2021 directing agencies such as the FTC and the Department of Justice to prioritize hospital and insurance consolidation.
Antitrust authorities have targeted transactions between health systems and have recently increased their surveillance of transactions involving digital health providers, public companies, and digital health providers. technology and pharmacy chains.
Agent wins
Some health systems have cancel proposed transactions after raising antitrust concerns.
Two major deals collapsed in the same week last June. RWJBarnabas Health of West Orange, New Jersey, has canceled its proposed acquisition of the St. Peter’s is headquartered in New Brunswick, New Jersey after the FTC sued to block the deal claiming that the combined entity would control about half of the market for general acute care services in Middlesex County.
Days later, Nashville, Tennessee-based HCA Healthcare canceled a proposed agreement for five Dallas-based Steward Health Care System hospitals in Utah following an FTC lawsuit alleging the deal would cut reduce the number of health systems providing services from three to two. in some markets.
Four months before those cases, Lifespan and Care New England Health System, two nonprofit health systems based in Providence, Rhode Island, canceled their plans to merge after the FTC sued to block the deal that it did. They believe it will increase prices, pose a risk to quality and reduce wages.
The transaction has been completed
As healthcare delivery grows with the rise of so-called industry disruptors, regulators are broadening their horizons to examine transactions between the giants. retail and technology.
CVS Health continues to expand its healthcare offerings, and its activities have attracted the attention of the government. governing body Looking for more information back to comity The acquisition is worth 8 billion USD of Dallas-based home health care company Signify Health and Buy 10.6 billion USD of Chicago-based primary care provider Oak Street Health, although both agreements eventually passed.
FTC open an investigation into Amazon’s $3.9 billion purchase of primary care chain One Medical, closed in february. The FTC said it will monitor how this acquisition affects competition and how the tech giant uses patient information owned by New York and San Francisco-based One Medical.
The FTC has requested information about the $5.4 billion merger between UnitedHealth Group and Lafayette, Louisiana-based home health provider LHC Group extend the duration of the agreementbut the regulator ultimately decided not to block the deal, this closed in february. The Justice Department also targets UnitedHealth Group’s $13 billion acquisition of Nashville, Tennessee-based technology company Change Healthcare in 2022, suing to block the acquisition on the grounds that it would violates federal antitrust laws by allowing insurance companies access to information about how rival companies pay suppliers. A federal judge dismissed the challenge and the merger was completed in October. The Justice Department and attorney generals of Minnesota and New York support efforts to fight the deal this month.
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Beth Vessel, a partner at law firm Holland & Knight, says an antitrust investigation can cost a company millions of dollars – plus time and attention – depending on the timing. length and whether it goes to trial. “For hospitals, they often merge because there are financial concerns,” Vessel said. “They are just willing to do so much to try to reach an agreement. They can win if they really push it, but it’s going to be expensive.”
Even if the FTC or Justice Department pulls out, Vessel said, the cost could affect the overall value of the transaction, and the investigation could worry customers.
Deterrence effect
The completion of a few big deals doesn’t necessarily mean the administration’s antitrust strategy isn’t working. Companies that may have been looking for an M&A partner in a looser regulatory environment may be reluctant to try if they anticipate a fight with the government.
Robert Miller, co-president of the business division of law firm Hooper, Lundy & Bookman, said companies like Amazon with strong financial positions can take the risk and have the resources to protect themselves against it. antitrust claims. However, companies like nonprofit health systems with tight budgets may discourage transactions, he said.
“I think the FTC is happy to have a deterrent effect resulting in people never letting a deal out of the room,” said Adam Biegel, co-chair of the antitrust group at law firm Alston & Bird. .
Avoid attention
Healthcare attorneys emphasized the need to conduct analysis early in the settlement process to determine if there were potential enforcement concerns. Biegel said companies need to do their research first and come up with evidence-based explanations of why they aren’t breaking antitrust laws. “Get ready to explain why you shouldn’t be the next poster kid for FTC or DOJ enforcement,” he said.
