The healthcare industry has been thrown numerous curveballs over the past year, from an unprecedented Supreme Court decision regarding access to abortion care nearly a year ago to the end of the COVID-19 public health emergency last month—along with a rocky economy and staffing shortages.
In response to the uncertainty, lawyers working with health systems, nursing homes, digital health startups and provider groups have seen the demand for certain services spike.
In this first installment of a two-part series, lawyers share two of the biggest reasons their healthcare clients are seeking counsel: federal scrutiny of deals and shifting reproductive healthcare policies. Part two of the series, in which lawyers discuss workforce challenges and remote prescribing regulations, can be found here.
Scrutiny of deals
President Joe Biden’s Federal Trade Commission and Justice Department have put an emphasis on preventing anti-competitive business practices across industries, leading healthcare leaders in many sectors to think strategically before inking deals.
The FTC filed a lawsuit in June 2022 to block Nashville, Tennessee-based HCA Healthcare’s proposed acquisition of five Steward Health Care hospitals in Utah. The health system scrapped the deal two weeks later.
In September, the agency launched an investigation into Amazon’s acquisition of primary care provider One Medical. Though the FTC did not block the companies from finalizing the deal in February, it said the probe would continue.
Companies with stronger financials and a greater ability to take on risk are going to be the ones pursuing mergers and acquisitions.
Cross-market deals may also fare better than those that could consolidate healthcare services and drive up costs.
“For most providers, especially nonprofit health systems that are already squeezed coming out of the pandemic and are facing staffing shortages … the threat of an FTC action is something that’s going to have a chilling effect on a deal,” said Robert Miller, co-chair of the business department at law firm Hooper, Lundy & Bookman.
Companies should conduct an analysis early on in the dealmaking process to determine if there’s potential for an FTC concern, said Sarah Ernst, co-chair of Alston & Bird’s corporate practice area and past chair of its healthcare group. She recommends sellers reach out to multiple potential buyers during the auction process to drive interest in an acquisition and assess the antitrust risk of a deal with each entity before selecting the strongest partner.
A federal antitrust investigation could amount to millions of dollars in costs, involve outside counsel expenses and distract from productivity—even if the government finds no wrongdoing.
“Even if [the agencies stand] down at the end of it, that is a very large expense that can eat into the additive value of the transaction or even make your customers worry during that investigation, and so you lost some business just for going through the fight,” said Adam Biegel, co-chair of Alston & Bird’s antitrust team.
Reproductive care hurdles
Since the Supreme Court overturned Roe v. Wade in June 2022, abortion access has been left to the discretion of the states. A federal judge in Texas also suspended the Food and Drug Administration’s 2000 approval of the abortion medication mifepristone in April, causing further uncertainty as the case winds its way through the courts.
Law firms have modified their operations to address the increased number and complexity of questions from clients that provide reproductive care, such as health systems that employ OB-GYNs or operators of telehealth abortion companies.
“[Providers] are getting tripped up or nervous about compliance with laws that may have been on the books for a while,” said Alicia Macklin, co-chair of the behavioral health practice group and the health equity task force at Hooper, Lundy & Bookman. For example, they are asking more questions about patient consent requirements, she said.
“It’s a tough position to be in for a provider when you have conflicting or even uncertain laws,” Macklin said.
Many firms are tracking state legislation and ballot initiatives in order to help clients understand which services they can provide or if they can refer patients to another provider across state lines.
Hooper, Lundy & Bookman formed a practice group in July to help provider clients understand various policies’ practical implications. Manatt, Phelps & Phillips established a community of practice where stakeholders can share their expertise navigating reproductive health issues. The law firm and two venture funds are also conducting workshops this month with more than a dozen companies, including regional health systems, digital health companies and payers, to discuss barriers to care and develop solutions and partnerships to address reproductive health access.
Law firm leaders say ongoing challenges are likely on the way. Last July, Biden used his authority to sign an executive order directing the Health and Human Services Department to expand access to emergency contraception and protect patient privacy, said Stephanie Gross, co-chair of the reproductive health practice at Hooper, Lundy & Bookman. A new president could walk back such initiatives.