President Biden’s administration has been keenly focused on competition issues concerning health care mergers and acquisitions. This focus culminated in the release of new draft merger guidelines during the summer, which carry significant implications for the health care sector, especially physician practice transactions. Some key points include:
The Federal Trade Commission (FTC) and Department of Justice (DOJ) have introduced a draft of new guidelines detailing their approach to reviewing mergers and acquisitions. This move indicates that antitrust authorities are intensifying their scrutiny of many transactions.
In July 2021, President Biden issued an Executive Order on Promoting Competition in the American Economy, emphasizing the high costs of prescription drugs and healthcare services in the U.S. compared to other countries. The order also highlighted the administration’s intent to enforce antitrust laws to address industry concentration, market power abuses, and the negative impacts of monopolies, especially in the healthcare sector.
The new draft guidelines suggest that any transaction involving a party with at least a 30% market share will likely undergo thorough examination to determine if they are reinforcing or expanding a “dominant” position. The guidelines also consider the broader context of a transaction, especially if it’s part of a series of acquisitions by a buyer. Although these guidelines are currently open for public comment and won’t bind courts, they often serve as influential references in court decisions.
Implications for Health Care and Physician Practice Sales:
- Diligence on Buyers: Sellers should evaluate potential buyers not just based on valuation but also on the antitrust risk associated with the buyer’s market share or previous acquisitions.
- Relevance of Internal Documents: If a buyer has a history of multiple physician acquisitions, antitrust authorities might request business documents from both parties, emphasizing the importance of these documents in assessing antitrust risks.
- Expect More Detailed Investigations: Healthcare providers should be prepared for more rigorous scrutiny from antitrust authorities, which may involve answering more questions and providing more documents. Proper planning and preparation can help address potential antitrust inquiries more efficiently.