The healthcare system in the United States has felt unprecedented stress due to the COVID-19 pandemic, and many facilities are not fully equipped to address patient needs. As numbers are expected to spike again in many parts of the country, hospitals and other providers are seeking ways to increase capacity. However, with many non-emergency treatments and elective procedures put on hold, hospitals do not have as much revenue coming in to simply expand their resources, so combining forces with competitors can seem like the only feasible option in many situations.
FTC Review of Healthcare Mergers
While the FTC did try to fast-track merger reviews and investigations in the early stages of the pandemic, the Commission is not relaxing its standards for antitrust reviews. The director of the Bureau of Competition of the FTC stated a couple of months ago that agents and investigators would not be “changing the rules” of antitrust cases in the U.S. The FTC plans to scrutinize each and every healthcare merger and to aggressively enforce antitrust laws, in spite of the healthcare challenges and economic crisis of 2020.
The Failing Firm Defense
The so-called failing firm defense permits mergers that would otherwise be anticompetitive to proceed if the target company is under financial distress. However, a lack of resources of a hospital does not necessarily constitute distress for a successful defense. The merger guidelines of the FTC state that this defense requires the following:
- The target company cannot fulfill its financial and contractual obligations in the foreseeable future
- Successful reorganization through Chapter 11 bankruptcy is not a viable option
- There have been good-faith attempts to seek more competitive offers as an alternative to the seemingly anti-competitive merger
This is a difficult standard to meet for this defense, and the FTC director stated they would continue to uphold this strict standard throughout the pandemic. This was justified by claiming that consumers in the U.S. need antitrust protections “now as much as ever.”
Takeaways for Healthcare Providers
Just because your healthcare facility is struggling financially does not mean that you will have a green light for mergers and acquisitions without facing serious regulatory hurdles. Expect both state and federal regulators to scrutinize your merger plans and challenge them if there are anticompetition concerns.
Now, perhaps more than ever, it is critical to have the right legal representation by an antitrust attorney if your healthcare practice is seeking relief through a merger. Having legal help can improve your chances of a successful transaction that helps not only your company but the patients in need of medical care in your area.
Consult with an Experienced Antitrust Lawyer Handling Cases Nationwide
The Law Offices of George M. Sanders, P.C., is based out of Chicago, but our antitrust attorneys assist clients and companies across the United States. Never hesitate to contact us if you have any antitrust questions or concerns. Waiting to seek legal help can be a costly decision.