Private Equity: The Next Antitrust Target for FTC and DOJ?

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TL/DR –

The Federal Trade Commission (FTC) and Antitrust Division of the Department of Justice (DOJ) are signaling that private equity firms may be next on the Biden Administration’s antitrust enforcement agenda. The move comes amid concerns that these firms’ investments in healthcare have driven up costs while reducing quality and access. The concerns are attributed to the incentive structure of the private equity model, which prioritizes short-term profits over patient care and well-being.


US Federal Trade Commission (FTC) Checks Private Equity’s Role in Healthcare

The head honchos at the Federal Trade Commission and Department of Justice’s Antitrust Division are hinting that private equity (PE) firms could be next on the Biden Administration’s antitrust enforcement hit list.

Concerns Voiced at Recent Workshop

At a recent Virtual Workshop on Private Equity in Health Care, top officials from the FTC, DOJ, Health and Human Services and Centers for Medicare and Medicaid Services suggested that PE firms’ investments in healthcare are increasing costs and reducing quality and access. They pinned these concerns on the PE model’s focus on short-term profits over patient care.

The workshop is of note as while some merger challenges have targeted PE firms, most healthcare deals involving PE buyers have been allowed to close without investigation. This may change in the near future, as the workshop’s rhetoric hinted at increased scrutiny and possible enforcement action against PE firms.

One striking comment from FTC Chair Lina Khan linked PE ownership to increased mortality rates in nursing homes. Doctors and nurses at the workshop also related their work experiences post-acquisition by PE firms, with stories of staff reductions, drug and supply shortages, and declining patient care.

Academic Concerns and Market Effects

Economist Dr. Eileen Applebaum highlighted the range of effects that can be attributed to PE ownership, from profit-taking that hampers investment in facilities and staffing, to the encumbering of acquired healthcare companies with debt. Other participants voiced worries about the rising PE ownership of specialist medical groups and healthcare facilities.

New Request for Information Signals Increased Scrutiny

The recent workshop coincided with the FTC, DOJ, and HHS issuing a new Request for Information seeking public opinion on “Corporate Greed in Healthcare.” This cross-government inquiry aims to understand how certain healthcare market transactions may boost profits for firms while threatening patient health, worker safety, quality of care, and healthcare affordability. The new merger guideline that curbs anticompetitive acquisition strategies will likely be factored in future enforcement actions against PE firms.

Implications for PE Firms

Whether a particular PE transaction will draw investigation will be case-specific, with the agencies considering the PE firm’s prior acquisitions and their effects on quality, access, and price. Early analysis and planning is pivotal to any M&A strategy to best gauge how to lessen and limit enforcement risk.


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