Healthcare Merger Antitrust Review: Increased Scrutiny for Any Provider Merger

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David Balto, James Kovacs, Jul 24, 2015

For nearly the last decade, there has been increased emphasis on controlling healthcare spending and costs in the United States. State and federal antitrust enforcement agencies have taken on a renewed focus of provider consolidation in attempts to implement cost containment in the healthcare system for both consumers and payors. These agencies, specifically the Federal Trade Commission (“Commission”), have been reinvigorated in recent years to litigate and prevent potentially anticompetitive healthcare provider mergers. However, whereas previously the focus of the Commission and other enforcement agencies has been on horizontal mergers—i.e. a hospital acquiring another hospital—there is also now increasing interest in vertical combinations—i.e. a hospital acquiring a physician practice.

As a result of heightened scrutiny by the enforcement agencies, provider groups seeking both vertical and horizontal acquisitions and collaborations face complex antitrust and regulatory challenges. As Assistant Attorney General Bill Baer recently said, “merger enforcement, in particular, is a predictive exercise.” Merging provider parties aware of the recent agencies actions will be better prepared to defend their transactions before the agencies, or a court if necessary. First, understanding the agencies’ stance on merger efficiencies is key for merging parties. Second, there are likely different remedies to potentially anticompetitive mergers depending on whether a transaction is being reviewed by the federal government or a state government. Third, knowing the regulations of various states is necessary to understanding the pulse of the state agency reviewing a merger.

This article discusses recent developments in healthcare provider mergers following the above. First, it notes the role of efficiencies post-St. Luke’s. Second, the article scrutinizes the use of remedies by federal and state enforcers. Third, it examines the increased usage of state legislation and regulation. And finally, the article briefly discusses the potential impact of health insurance mergers on healthcare providers.