On March 5, 2024, the Federal Commerce Fee (“the FTC”) hosted a public workshop titled “Non-public Capital, Public Influence: An FTC Workshop on Non-public Fairness in Well being Care”, which lined the influence 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”), educational thought-leaders, and well being care professionals. On the identical day because the workshop the Businesses launched a “Cross-Authorities Inquiry on Influence of Company Greed in Well being Care,” issuing a Request for Info (“RFI”) searching for public touch upon well being care offers involving non-public fairness companies, together with offers that might not be reportable beneath 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 trade. 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 acknowledged that “[a] widespread theme throughout these feedback is that rising financialization within the well being care trade 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 examine purporting to point out that non-public fairness possession of nursing properties was answerable 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 trade, together with:
  • Serial acquisitions of supplier practices (“rollups”), notably when the practices are in an identical geographic location;
  • Brief-term acquisitions utilizing giant quantities of debt, with the aim of accelerating income shortly and reselling (“strip and flip”);
  • Investments into competing portfolio firms inside the identical trade; and
  • PE illustration on the boards of competing portfolio firms (“interlocking directorates”).[1]
• Well being care market individuals (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 fireplace chat how Rhode Island’s Hospital Conversions Act allowed the state to impose circumstances on a personal fairness transaction, and referred to as for comparable laws. The place comparable laws doesn’t but exist, Slaughter and Neronha inspired state attorneys normal to make the most of state antitrust and client 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 area, will solely proceed to extend. A number of states[3] have proposed new laws—explicitly geared toward PE—that might give state attorneys normal extra energy to research and probably block investments by PE companies within the well being care trade. 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 trade and forcefully implement the legislation in opposition to illegal offers. Listening to from sufferers, staff, and market individuals will probably 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 relating to enforcers’ elevated scrutiny of interlocks beneath Part 8 of the Clayton Act is offered 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, Scorching 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 Follow for Antitrust Violations, Sheppard Mullin (Sept. 26, 2023); John Carroll, Leo Caseria, Bevin Newman & Malika Levarlet, Mergers & Acquisitions Replace: A Nearer Take a look at the Influence 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 Programs Reform: Stopping Dangerous Healthcare Offers).