While hospital mergers and acquisitions declined overall during the COVID-19 pandemic, there were still an impressive 54 transactions announced in 2022 and 15 in the first quarter of 2023. In fact, a number of mega-mergers occurred in 2022, which are acquisitions of smaller entities that have annual revenues of over $1 billion. Many of the acquisitions were “cross-market” deals, when a major health system in one region buys up a hospital in a different one. Federal regulators have traditionally challenged only mergers of hospitals within a single geographic region, but the Federal Trade Commission (FTC) and the Department of Justice (DOJ) are planning to produce modern guidelines that reflect different types of deals.
There were 1887 hospital mergers announced from 1998 through the end of 2022. In early 2022, the FTC and the DOJ received 1900 comments on how to modernize its merger guidelines. To date, the DOJ and FTC have not released new guidelines; the agencies are refining them and expect to release them in the next few months.
- Among the largest 2022 deals are Advocate Health and Atrium Health, Essentia Health and Marshfield Clinic Health Systems, and Sanford Health and Fairview Health, as well as the University of Michigan Health’s $800 million commitment to expand services as part of its merger with Sparrow Health — a 733-bed teaching hospital located in Lansing, Michigan that is affiliated with the Colleges of Human Medicine and Osteopathic Medicine at nearby Michigan State University.
- The FTC blocked only four mergers in 2022. Of those, two involved the biggest health systems in New Jersey: Hackensack Meridian Health and RWJBarnabas Health. The FTC also blocked the merger of the two largest hospital systems in Rhode Island and forced HCA Healthcare to abandon its plans to buy Utah’s Steward Health Care System.
- In February 2023, the DOJ suddenly withdrew three long-time healthcare antitrust enforcement policies. These nonbinding guidance documents were never considered “the law” but they were heavily relied upon by the industry. The DOJ said the guidance was “overly permissive on certain subjects” given the dramatic changes in the healthcare landscape over the years, so that mergers must be reviewed on a case-by-case basis.
As hospital mergers and acquisitions continue to happen at an impressive pace, healthcare entities that are interested in consolidating should look out for any updates to DOJ and FTC’s merger guidelines. In the meantime, organizations looking to merge will need to evaluate their circumstances carefully to determine whether a transaction can weather close scrutiny. Enforcement policy is expected to target private equity transactions in healthcare and include new theories of harm, adjust concentration thresholds, and otherwise broaden the scope of merger activity that is subject to investigation.
The United States Department of Justice. Justice Department Withdraws Outdated Enforcement Policy Statements. The Withdrawal Best Serves the Interests of Healthcare Competition. Accessed June 9, 2023.
Ferrara AS, Küttner M, Dubrow JB. Grosberg JR, Dionnet S, Evola M. Antitrust M&A Snapshot|Q1 2023. Accessed June 9, 2023.
Horowitz BT. Larger Hospital Mergers Expected in Post-pandemic Market, Kaufman Hall Says. Accessed June 9, 2023.