On March 5, 2024, the Federal Commerce Fee (“the FTC”) hosted a public workshop titled “Non-public Capital, Public Impression: 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 Providers (“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 Impression of Company Greed in Well being Care,” issuing a Request for Info (“RFI”) searching for public touch upon well being care offers involving personal fairness companies, 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 selections associated to well being care consolidation. The general public has 60 days to submit feedback to the Businesses.
Listed below are key takeaways from the workshop:
- The Businesses stay skeptical of personal fairness’s rising 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. For example, FTC Chair Lina Khan acknowledged that “[a] frequent theme throughout these feedback is that rising financialization within the well being care business can power 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 Basic of the Antitrust Division of the DOJ, cited a examine purporting to point out that personal fairness possession of nursing houses was liable 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 companies within the well being care business, together with:
- Serial acquisitions of supplier practices (“rollups”), significantly when the practices are in an analogous geographic location;
- Brief-term acquisitions utilizing giant quantities of debt, with the aim of accelerating earnings rapidly and reselling (“strip and flip”);
- Investments into competing portfolio firms inside the identical business; and
- PE illustration on the boards of competing portfolio firms (“interlocking directorates”).[1]
- Well being care market members (i.e. docs and nurses) offered 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 Basic Peter Neronha mentioned throughout a fireplace chat how Rhode Island’s Hospital Conversions Act allowed the state to impose situations on a personal fairness transaction, and known as for comparable laws. The place comparable laws doesn’t but exist, Slaughter and Neronha inspired state attorneys basic to make the most of state antitrust and client safety legal guidelines, in addition to attorneys’ basic 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 area, will solely proceed to extend. A number of states[3] have proposed new laws—explicitly aimed toward PE—that may give state attorneys basic extra energy to analyze and doubtlessly block investments by PE companies 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 regulation in opposition to illegal offers. Listening to from sufferers, employees, and market members can be essential in growing future enforcement and coverage efforts regarding consolidation within the well being care sector.” PE companies, sellers, and portfolio firms ought to concentrate on, and account for, these potential obstacles when contemplating well being care transactions.
FOOTNOTES
[1] Extra data concerning enforcers’ elevated scrutiny of interlocks underneath Part 8 of the Clayton Act is obtainable 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 (Might 11, 2023); John Carroll, Leo Caseria, Bevin Newman & Ann O’Brien, FTC Sues Non-public Fairness Agency and Anesthesiology Follow 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 Impression of the FTC and DOJ’s Proposed HSR Act Submitting Reform on Non-public Fairness Companies, 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 Methods Reform: Stopping Dangerous Healthcare Offers).
