More interest LifePoint might find more investor-owned competitors on the acquisition trail. Besides the established companies, several large private-equity firms that aren't invested in the hospital sector are eager to jump in now, Cain's Barry and Beith say. RegionalCare Hospital Partners, a Brentwood, Tenn.-based company founded last year by former Province Healthcare Co. executives, is perhaps the leading edge of this interest, they say. Also, if privately held HCA were to make a public stock offering, it would be a catalyst for private-equity investment in hospitals, Beith says.
Deals between not-for-profits are expected to continue, despite the possible impediment of antitrust concerns. MaineHealth, Portland, decided to scuttle its deal with 53-bed Goodall Hospital, Sanford, Maine, after the FTC made a second request for information in the case, but the system has a new plan for getting local deals done, according to President and CEO Bill Caron.
Maine has a certificate of public advantage law, or COPA, and MaineHealth plans to use that state process to do a couple of deals that the system is contemplating, Caron says. In at least one of the potential deals, a federal regulatory filing would still be required, he says.
Douglas Ross, a partner at the law firm Davis Wright Tremaine in Seattle, says using COPA laws to do deals has been out of favor for about 15 years because the FTC wasn't intervening in very many deals. “If you could do the deal without it you would,” Ross says, referring to COPA.
COPA approval could be just the state-government blessing that mergers need to pass muster with a more confident FTC, Ross says. Richard Feinstein, director of the FTC's Bureau of Competition, has said several times in public that the FTC is reluctant to pursue hospital antitrust cases without support from that state's attorney general, Ross says. The restrictions on a merged organization's behavior that are codified in a COPA might be what a deal needs to win over a state attorney general, he says.
Thanks to the recession, another tack will be the failing-company exception to the antitrust laws, but that is a tough one to navigate, Ross says. The difficulty is that an acquirer not only has to prove that the hospital was failing and has no reasonable prospect of turning around but also that there are no other feasible buyers, he says.
“I do expect that we'll see more of this in healthcare, but it isn't the panacea that people think it is,” Ross says. “And obviously, it's no panacea for the hospital that failed.”