There are different reasons why healthcare providers might face antitrust concerns, and a common situation is when a provider is involved in a merger or acquisition. Both the Federal Trade Commission (FTC) and the Department of Justice (DOJ) have been ready to devote extensive resources to investigate the terms of healthcare mergers and acquisitions to prevent unfair healthcare competition. If contract terms are not properly set out, or if the investigation is not handled properly, it can cause costly issues, including the entire merger falling apart. It is important to have the right legal representation from a healthcare antitrust lawyer from the start of the merger process.
There are two different types of mergers and acquisitions:
Horizontal mergers – These involve two companies offering the same services joining together. This can increase revenue with reduced resources, and also helps decrease competitive threats in the market. Many smaller physician practices might join together to create a network to gain leverage against insurance companies or better compete with larger healthcare facilities.
Vertical mergers – This occurs when a larger enterprise – such as a hospital – acquires a smaller provider to increase efficiency. Large medical centers might acquire physician practices, independent surgical centers, and more. While this can provide benefits for the acquired practice, it can create problems for other independent providers in the market.
Both of these types of mergers and acquisitions can raise eyebrows with the FTC and DOJ since they both impact marketplace competition. In recent times, however, these agencies have been seemingly more concerned with horizontal mergers between smaller companies rather than vertical mergers. The 2020 proposed guidelines for vertical mergers note some concerns, but provide little signs that vertical consolidation will be halted or impacted under the new guidance.
Under the Hart-Scott-Rodino Act, most proposed merger transactions are reviewed by the FTC and DOJ if they might impact commerce in the United States. The FTC has reviewed horizontal healthcare mergers that are surprisingly small and seemingly insignificant in the market. Any healthcare provider planning a merge should be prepared for a government investigation.
The steps of an investigation can vary, but might look somewhat like the following:
- The companies properly report a proposed transaction when necessary
- The FTC and DOJ conduct a preliminary review and decide whether there are any antitrust concerns
- If the merger requires further review, it will be assigned to one agency (the FTC has its own Healthcare Competition Division)
- If a second review is necessary, the companies will need to provide extensive information as requested by the agency
- The agency can either decide to let the deal move forward, reach a settlement with the parties regarding the terms of the merger, or take legal action to block the merger
Consult with an Antitrust Attorney as Soon as Possible
The best way to prevent issues with a healthcare merger is to have an experienced antitrust lawyer reviewing the transaction and all documentation from the very start. You want the help of the Law Offices of George M. Sanders, P.C., before your merger begins, so please contact us for help today.