Shortly after President Joe Biden took office in 2021, he pledged that his administration would cast a skeptical eye on big mergers and acquisitions. When it comes to healthcare deals, that appears to be a promise kept.
The Federal Trade Commission and Justice Department have beefed up antitrust enforcement and conducted investigations into deals between health systems, health insurance companies, technology firms and pharmacy chains. Still, several major deals have consummated during this time.
Here’s what you need to know about the Biden administration’s approach to healthcare antitrust enforcement.
An aggressive stance
Healthcare consolidation has occurred at a rapid pace in recent years as more companies conclude they can't flourish on their own. Merger and acquisition partners tout greater efficiency as a means to reduce healthcare spending, but evidence suggests these deals lead to less competition, higher costs, lower quality and suppressed wages.
The Biden administration has taken an aggressive approach to healthcare deals. Biden signed an executive order in 2021 that directs agencies such as the FTC and the Justice Department to prioritize hospital and insurance consolidation.
Antitrust agencies have targeted deals among health systems and, more recently, paid increased scrutiny to transactions involving digital health providers, tech companies and pharmacy chains.
Several health systems have called off proposed deals after triggering antitrust concerns.
Two major deals fell apart the same week last June. RWJBarnabas Health of West Orange, New Jersey, called quits on its proposed acquisition of New Brunswick, New Jersey-based St. Peter’s Healthcare System after the FTC sued to block the deal. The commission claimed the combined entity would’ve controlled about half of the market for general acute-care services in Middlesex County.
Days later, Nashville, Tennessee-based HCA Healthcare scrapped its proposed deal for five of Dallas-based Steward Health Care System's hospitals in Utah following an FTC lawsuit, which alleged the deal would have cut the number of health systems providing services from three to two in some markets.
Four months before those cases, Lifespan and Care New England Health System, two Providence, Rhode Island-based nonprofit health systems, canceled merger plans after the FTC sued to block the deal, which it claimed would have increased prices, risked quality and reduced wages.
As healthcare delivery evolves with the rise of so-called industry disruptors, regulators are widening their lenses to examine transactions among retail and tech giants.
CVS Health continues to expand its healthcare offerings, and its maneuvers have attracted government attention. Regulators sought more information about the company's $8 billion acquisition of Dallas-based home health company Signify Health and its $10.6 billion purchase of Chicago-based primary care provider Oak Street Health, although both deals eventually went through.
The FTC launched an investigation into Amazon’s $3.9 billion purchase of primary care chain One Medical, a deal which closed in February. The FTC said it will monitor how this acquisition affects competition and how the tech giant uses patient information that New York and San Francisco-based One Medical possesses.
The FTC requested information about the $5.4 billion merger between UnitedHealth Group and Lafayette, Louisiana-based home health provider LHC Group, extending the deal’s timeline. But the regulator ultimately decided not to block the deal, which closed in February.
The Justice Department also set its sights on UnitedHealth Group’s $13 billion acquisition of Nashville, Tennessee-based technology company Change Healthcare in 2022, suing to block the deal on the grounds that it would violate federal antitrust law by giving the insurance company access to information on how rival companies pay providers. A federal judge denied the challenge and the merger consummated in October. The Justice Department and the attorneys general of Minnesota and New York backed off efforts to fight the deal in March.
The price tag
An antitrust investigation can cost a company millions of dollars—plus time and attention—depending how long it lasts and whether it goes to trial, said Beth Vessel, a partner at law firm Holland & Knight. “For hospitals, often they’re merging because there are financial concerns," Vessel said. "There’s only so much they’re willing to do in terms of trying to get a deal through. They might win if they really pushed for it, but it would be very expensive."
Even if the FTC or the Justice Department back off in the end, the costs could impact the overall value of a transaction and the investigation could concern customers, Vessel said.
The deterrent effect
The completion of several big deals doesn't necessarily mean that the administration's antitrust strategy isn't having an effect. Companies that may have sought M&A partners in a more lax regulatory environment may be reluctant to try if they anticipate having to fight the government.
Companies such as Amazon that are in strong financial positions can take risks and have the resources to defend themselves against antitrust claims, said Robert Miller, co-chair of the business department at law firm Hooper, Lundy & Bookman. But companies such as nonprofit health systems with tight budgets may be discouraged from making deals, he said.
“I think the FTC is happy, for example, to have that deterrent effect that leads to people not letting a deal ever get out of the boardroom,” said Adam Biegel, co-chair of the antitrust team at law firm Alston & Bird.
Healthcare attorneys emphasize the need to conduct analyses early in the deal-making process to determine whether there are potential enforcement concerns. Companies need to do their homework ahead of time and produce evidence-based explanations for why they’re not violating antitrust laws, Biegel said. “Be ready to explain why you shouldn’t be the next poster child for FTC or DOJ enforcement,” he said.