The Federal Trade Commission and Justice Department challenged 50 merger and acquisition proposals across all sectors of the economy in 2022, including six proposed healthcare deals, according to a new report.
The FTC’s 24 merger enforcement challenges in 2022—including five in healthcare—marked the second-highest number over the prior 10 years, according to the annual report for the fiscal year ended Sept. 30 on the Hart-Scott-Rodino Act premerger notification program issued Thursday. The commission, under Chair Lina Khan, seeks to ramp up oversight of consolidation across the healthcare industry, threatening to prolong proposed transactions and potentially derail deals.
Related: Healthcare deals may slow under FTC proposal
Khan referenced the healthcare industry throughout a prepared statement, noting anecdotal feedback from a healthcare startup criticizing healthcare mergers that have “made it extremely difficult for patients living in rural areas to access critical services for mental health.” In another example, she referenced an organization that represents 200,000 nurses that told the FTC nurses are reluctant to file complaints with their employers, fearing they would be blacklisted by an area's main health system.
“We have heard from a wide breadth of people about how consolidation directly threatens their ability to live stable and secure lives,” Khan said in the statement.
Here are three takeaways from the report and the premerger notification program:
1. The FTC and DOJ challenged six healthcare deals
The Justice Department sued to block UnitedHealth Group's $13 billion acquisition of health IT company Change Healthcare in February 2022, alleging the deal would give UnitedHealth access to proprietary information on what its competitor insurers pay providers. As a result, Change divested its claims editing software.
The FTC sued to block three proposed health system transactions in 2022, causing the organizations to abandon their acquisition plans. Those health systems included Lifespan Health System and Care New England Health System, both based in Providence, Rhode Island; West Orange, New Jersey-based RWJBarnabas Health and St. Peter's Healthcare System in New Brunswick, New Jersey; and Nashville, Tennessee-based HCA Healthcare and Dallas-based Steward Health Care.
The FTC also challenged Total Renal Care’s proposed acquisition of 18 dialysis clinics from the University of Utah Health in Salt Lake City. Total Renal Care is a subsidiary of dialysis provider DaVita, which sold three clinics in January 2022 following the lawsuit. In addition, the commission sued Medtronic in May 2022 over the devicemaker’s $1.1 billion bid for Intersect ENT, leading to a divestiture of an Intersect subsidiary that manufactures ear, nose and throat devices.
2. The number of premerger notification filings has surged
Across all industries, 3,152 proposed transactions were reported to the agencies in 2022, also the second-highest tally over the prior 10 years.
The FTC and DOJ asked for more information from parties involved in 47 of the 3,152 proposals. Meanwhile, the agencies have struggled to keep up with the significant increase in reported merger or acquisition proposals in 2021 and 2022, relative to historical trends. The number of transactions reported in 2022 was about 50% higher than the historical averages, according to the report.
That is, in part, why the premerger notification program needs to be updated, Khan said in the statement. The program gives regulators 30 days to determine whether a deal warrants close investigation, but that timeline was set in an era when about 150 merger notifications occurred a year, she said.
3. The FTC wants to update the HSR Act
The agency issued a proposed rule in June to update the Hart-Scott-Rodino premerger program, potentially requiring healthcare companies pursuing mergers to disclose more information about the transaction and potentially delaying closing dates.
The proposed rule would require merging parties to disclose any minority investors in an effort to weed out conflicts of interest; information about prior acquisitions; supplier agreements; subsidies from foreign entities and workforce data, including information on executives and board members. The FTC estimated the requirements would add an average of 107 hours to the average time of 37 hours it now takes to prepare a merger filing.
