On March 5, 2024, the Federal Commerce Fee (“the FTC”) hosted a public workshop titled “Non-public Capital, Public Affect: An FTC Workshop on Non-public Fairness in Well being Care”, which coated the affect 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 Companies (“HHS”) (collectively, “the Businesses”), tutorial thought-leaders, and well being care professionals. On the identical day because the workshop the Businesses launched a “Cross-Authorities Inquiry on Affect of Company Greed in Well being Care,” issuing a Request for Info (“RFI”) looking for public touch upon well being care offers involving personal fairness corporations, together with offers that may not be reportable underneath the Hart-Scott-Rodino Act. The Businesses 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 Businesses.
Listed here are key takeaways from the workshop:
- The Businesses stay skeptical of personal fairness’s growing investments within the well being care business. A number of panelists throughout the Businesses famous that PE’s involvement in well being care transactions can result in elevated consolidation and worse affected person outcomes. As an illustration, FTC Chair Lina Khan said that “[a] widespread theme throughout these feedback is that rising financialization within the well being care business can pressure medical professionals to subordinate their medical judgment to company decision-makers’ revenue motives on the expense of affected person well being.” Jonathan Kanter, Assistant Legal professional Normal of the Antitrust Division of the DOJ, cited a research purporting to indicate that non-public fairness possession of nursing properties 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”), notably when the practices are in an analogous geographic location;
- Quick-term acquisitions utilizing massive quantities of debt, with the purpose of accelerating income rapidly and reselling (“strip and flip”);
- Investments into competing portfolio corporations inside the identical business; and
- PE illustration on the boards of competing portfolio corporations (“interlocking directorates”).[1]
- Well being care market contributors (i.e. medical doctors 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 Legal professional Normal Peter Neronha mentioned throughout a hearth chat how Rhode Island’s Hospital Conversions Act allowed the state to impose circumstances on a personal fairness transaction, and referred to as for related laws. The place related 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, notably within the well being care house, will solely proceed to extend. A number of states[3] have proposed new laws—explicitly aimed 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 purpose of the RFI is to “allow the companies to precisely perceive the fashionable market realities of the well being care business and forcefully implement the regulation towards illegal offers. Listening to from sufferers, staff, and market contributors shall be important in growing future enforcement and coverage efforts referring to 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 data relating to enforcers’ elevated scrutiny of interlocks underneath Part 8 of the Clayton Act is accessible 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 Non-public Fairness, Sheppard Mullin (Could 11, 2023); John Carroll, Leo Caseria, Bevin Newman & Ann O’Brien, FTC Sues Non-public Fairness Agency and Anesthesiology Observe 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 Affect of the FTC and DOJ’s Proposed HSR Act Submitting Reform on Non-public Fairness Corporations, Sheppard Mullin (Oct. 5, 2023); Greg Smith, Phil Kim & John Tilton, Non-public 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).
