On March 5, 2024, the Federal Commerce Fee (“the FTC”) hosted a public workshop titled “Personal Capital, Public Influence: An FTC Workshop on Personal Fairness in Well being Care”, which lined the impression of personal fairness funding on the well being care system. The workshop included panelists from the FTC, the Division of Justice (“the DOJ”), the Division of Well being and Human Providers (“HHS”) (collectively, “the Companies”), educational thought-leaders, and well being care professionals. On the identical day because the workshop the Companies launched a “Cross-Authorities Inquiry on Influence of Company Greed in Well being Care,” issuing a Request for Info (“RFI”) looking for public touch upon well being care offers involving non-public fairness corporations, together with offers that may not be reportable below the Hart-Scott-Rodino Act. The Companies will use the RFI to tell future enforcement and coverage choices associated to well being care consolidation. The general public has 60 days to submit feedback to the Companies.
Listed below are key takeaways from the workshop:
- The Companies stay skeptical of personal fairness’s rising investments within the well being care business. A number of panelists throughout the Companies famous that PE’s involvement in well being care transactions can result in elevated consolidation and worse affected person outcomes. As an example, FTC Chair Lina Khan acknowledged that “[a] frequent theme throughout these feedback is that rising financialization within the well being care business can drive medical professionals to subordinate their medical judgment to company decision-makers’ revenue motives on the expense of affected person well being.” Jonathan Kanter, Assistant Lawyer Basic of the Antitrust Division of the DOJ, cited a research purporting to indicate that non-public fairness possession of nursing houses was chargeable for over 20,000 untimely deaths in simply 12 years.
- The workshop additionally made clear that antitrust enforcement seeks to focus on sure practices deployed by PE corporations within the well being care business, together with:
- Serial acquisitions of supplier practices (“rollups”), significantly when the practices are in an analogous geographic location;
- Quick-term acquisitions utilizing giant quantities of debt, with the aim of accelerating income rapidly and reselling (“strip and flip”);
- Investments into competing portfolio corporations throughout the identical business; and
- PE illustration on the boards of competing portfolio corporations (“interlocking directorates”).[1]
- Well being care market members (i.e. docs and nurses) supplied first-hand testimony of alleged decreased staffing and decrease high quality of care after PE acquisitions.
- FTC Commissioner Rebecca Slaughter and Rhode Island Lawyer Basic Peter Neronha mentioned throughout a hearth chat how Rhode Island’s Hospital Conversions Act allowed the state to impose situations on a non-public fairness transaction, and known as for comparable laws. The place comparable laws doesn’t but exist, Slaughter and Neronha inspired state attorneys normal to make the most of state antitrust and shopper safety legal guidelines, in addition to attorneys’ normal parens patriae authority, to fight PE consolidation within the well being care system.
Though PE has been a goal of elevated scrutiny for some time,[2] the workshop and RFI underscore that federal and state company and enforcer oversight of PE transactions, significantly within the well being care house, will solely proceed to extend. A number of states[3] have proposed new laws—explicitly geared toward PE—that may give state attorneys normal extra energy to analyze and doubtlessly block investments by PE corporations within the well being care business. Jonathan Kanter emphasised that the aim of the RFI is to “allow the businesses to precisely perceive the trendy market realities of the well being care business and forcefully implement the legislation in opposition to illegal offers. Listening to from sufferers, employees, and market members might be crucial in growing future enforcement and coverage efforts regarding consolidation within the well being care sector.” PE corporations, sellers, and portfolio corporations ought to pay attention to, and account for, these potential obstacles when contemplating well being care transactions.
FOOTNOTES
[1] Extra info relating to enforcers’ elevated scrutiny of interlocks below Part 8 of the Clayton Act is offered right here.
[2] John Carroll & Joseph Antel, FTC, DOJ, and HHS Announce Interagency Initiatives to Promote Healthcare Competitors, Sheppard Mullin (Dec. 12, 2023); Ann O’Brien & Lindsey Collins, Sizzling Antitrust Enforcement Local weather Reaches Personal Fairness, Sheppard Mullin (Might 11, 2023); John Carroll, Leo Caseria, Bevin Newman & Ann O’Brien, FTC Sues Personal Fairness Agency and Anesthesiology Apply for Antitrust Violations, Sheppard Mullin (Sept. 26, 2023); John Carroll, Leo Caseria, Bevin Newman & Malika Levarlet, Mergers & Acquisitions Replace: A Nearer Have a look at the Influence of the FTC and DOJ’s Proposed HSR Act Submitting Reform on Personal Fairness Companies, Sheppard Mullin (Oct. 5, 2023); Greg Smith, Phil Kim & John Tilton, Personal fairness faces heightened FCA and antitrust scrutiny, PE Hub (Mar. 24, 2023)
[3] See, e.g., Navigating Elevated Well being Care Deal Scrutiny, slide 25 (Oregon HB 4130; (Pennsylvania Senate Invoice 548, For Revenue Well being Techniques Reform: Stopping Dangerous Healthcare Offers).
