In “How Policy, Regulation Will Challenge Consolidation in Healthcare,” antitrust litigation partner Ken Vorrasi spoke to RevCycleIntelligence about the impact of “Executive Order on Promoting Competition in the American Economy” on consolidation in health care.
“Hospital leaders should be mindful that the agencies can challenge consummated transactions at any time,” said Vorrasi. “They shouldn’t take solace in the fact that they’ve received front-end Hart-Scott-Rodino clearance. In reviewing past transactions, the agencies — the Federal Trade Commission (FTC) or state attorney general — could issue subpoenas and ask about price changes, what costs have been cut, what efficiencies have been realized, and what quality benefits there are and try to do an assessment as to whether or not the transaction was pro-competitive for insurers and patients or not.”
Regarding FTC challenges of health care merger and acquisition deals, RevCycleIntelligence shared an example where the FTC eventually ordered a restoration of the competition lost as a result of the acquisition. While rare, these challenges could become more common. “It is fair to say that an action like that one is more realistic and likely today than it was before the executive order and the new antitrust leadership,” Vorrasi stated.
“Health care leaders also need to be mindful of the impact and assessing the risk with their transactions that are vertical in nature, whether upstream or downstream, because those transactions have the attention of the agencies as well,” Vorrasi continued.
Moreover, Vorrasi discussed vertical integration. “We’re going to see more scrutiny in these areas, particularly with the new vertical merger guidelines the FTC and Department of Justice (DOJ) issued in 2020. That is certainly top of mind to the FTC, and the FTC has substantial experience with hospital-physician consolidation and continues to actively study its effects on competition and quality,” he said.
When assessing whether the acquisition of physicians is beneficial, Vorrasi explained that the FTC would want to know, with supporting evidence, that these transactions are truly leading to lower costs, better care quality and other benefits espoused by health care leaders during a deal.
The publication also asked, “Will the executive order slow down consolidation in health care?” Vorrasi responded, “Probably not.” He noted, “The order is still recent, but we have not seen any evidence to say it’s going to have a chilling effect — health care market activity remains robust. But I think the order has increased awareness of antitrust scrutiny in health care among business leaders. That could mean businesses doing a little bit more on the front end to assess antitrust risk and assess the transaction’s intended benefits versus plowing ahead with a deal in light of the executive order.”
“Most health care leaders, especially at larger organizations, are already knowledgeable about antitrust enforcement and the attention health care has received in the past. Many have also already been in front of the FTC and state regulators for previous deals,” Vorrasi reasoned.
“But it’s a nice reminder to them, particularly those at the very top, at the C-suite level and at the board level,” Vorrasi stated. “Organizational leaders have to continue to think about antitrust knowing the administration, the FTC and the state attorney general have health care as a top priority.”
Lastly, addressing strategies health leaders can execute now to prepare for greater antitrust enforcement in the future, Vorrasi said, “The FTC wants to see results, so you have to show what you have been able to achieve in the past. You can’t just say benefits will happen — that won’t work.”