An Update on Healthcare Mergers and Acquisitions — New Guidelines

What

Last month, the federal antitrust enforcement agencies announced that they intend to scrutinize mergers and acquisitions more aggressively. The announcement comes after both the Department of Justice (DOJ) and the Federal Trade Commission (FTC) withdrew long-standing policy guidance on healthcare antitrust enforcement. Accordingly, the healthcare industry has no formal guidance regarding acceptable communications about price and cost information, joint purchasing, and other types of collaborations — including accountable care organizations. In the wake of this uncertainty, the FTC subsequently proposed changes to the premerger notification form and the DOJ and FTC jointly released new draft merger guidelines. While the changes are designed to promote competition, they create hurdles and time delays for healthcare organizations planning to merge.  

When

On June 29, 2023, the FTC proposed amendments to the premerger notification rules that implement the Hart-Scott-Rodino Antitrust Improvements Act and to the Premerger Notification and Report Form. On July 19, the DOJ and the FTC announced released draft merger guidelines. The deadline for public comments on the draft guidelines is September 18, 2023. The FTC will be accepting comments on the premerger form changes until September 27, 2023.

Highlights

• The draft merger guidelines are based on responses to the agencies’ request for information in January 2022. Both agencies held four listening sessions to explore how M&A deals can potentially undermine the healthcare market.
• There are 13 new merger guidelines that the agencies will use to determine whether a deal is unlawfully competitive. They expand the definition of what constitutes a too-concentrated market, contemplate the combined effect of a series of acquisitions (for example, when a health system acquires several physician practices), and consider labor market information so the agencies may review how workers (including physicians and nurses) may be negatively impacted when their employers merge.
• The proposed changes to the premerger form would require additional information about the anticipated transaction, like the terms and rationale, narrative descriptions about the competitive landscape, and information regarding labor markets and employees. Merging parties must also identify any entities that can influence the transaction, including creditors, directors, and board observers.

Bottom Line

The recent withdrawal of healthcare antitrust enforcement policies indicates a shift to a more case-by-case evaluation of future healthcare industry M&A. The proposed merger guidelines and premerger notification changes are likely to stall or prevent anticipated acquisitions in the healthcare sector. At the very least, these changes will increase the cost of M&A transactions. Organizations looking to merge must carefully evaluate their circumstances to determine whether a transaction can withstand the increased scrutiny.

Sources

Federal Trade Commission. Federal Trade Commission Withdraws Health Care Enforcement Policy Statements. Accessed August 22, 2023.

Federal Trade Commission. FTC and DOJ Seek Comment on Draft Merger Guidelines. Accessed August 22, 2023.

U.S. Department of Justice Office of Public Affairs. Justice Department Withdraws Outdated Enforcement Policy Statements. Accessed August 22, 2023.