Healthcare M&As and the DOJ
Healthcare mergers and acquisitions (or M&As) occur when two or more healthcare organizations join their operations, resulting in a larger entity. These types of mergers can take on many different forms, including mergers between insurance companies, hospitals, pharmaceutical companies, and other healthcare businesses. There has been an increase in M&A activity in the healthcare industry in recent years. This trend is predicted to persist into 2023, with standalone facilities often being absorbed by larger, more established players (1). In line with current laws that aim to regulate and limit negative effects of such large movements on the general public, healthcare M&As are carefully scrutinized by the U.S. Department of Justice (DOJ).
The DOJ plays a key role in regulating healthcare M&As. The DOJ’s Antitrust Division in particular is responsible for making sure that M&As do not reduce competition or result in anticompetitive behavior across the healthcare industry. To this end, the division reviews proposed M&As to estimate whether they would harm healthcare recipients by reducing the quality of care, inflating prices, or reducing innovation in the healthcare space.
When the DOJ concludes that a proposed healthcare merger might harm competition, it may take action to require certain conditions be met before approving it or simply block the merger. For example, the DOJ may require the divestment of certain assets or business lines to prevent the merged entity from accumulating too much market power.
Recently, the DOJ has been particularly active in reviewing healthcare M&As—partially a result of the increasing consolidation in the healthcare industry, which has fueled concerns about the potential for increased healthcare costs and reduced competition.
In 2023, the Antitrust Division withdrew three outdated antitrust policy statements linked to enforcement in healthcare markets: the Department of Justice and FTC Antitrust Enforcement Policy Statements in the Health Care Area (Sept. 15, 1993), Statements of Antitrust Enforcement Policy in Health Care (Aug. 1, 1996), and Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (Oct. 20, 2011) (2). Following careful review, the division had assessed that the withdrawal of the three statements would the best way to promote continued competition and transparency. The statements were found to be overly permissive as regards information sharing and were no longer effectively fulfilling their aims of providing guidance to the public on relevant healthcare competition issues. The broad goal was to increase transparency around the division’s enforcement policies in healthcare markets (3). The Federal Trade Commission is expected to follow the DOJ’s lead (2). However, some critics continue to argue that the DOJ has not been sufficiently aggressive in preventing anticompetitive behavior and challenging healthcare mergers.
Overall, healthcare M&As are complex transactions requiring deep and thorough consideration and regulatory oversight. The DOJ’s mission in reviewing mergers is an essential protection against anticompetitive behavior, ultimately ensuring that consumers continue to have access to affordable, high-quality healthcare services.
The healthcare industry is in a state of constant evolution, but understanding the role of the DOJ in healthcare M&As is important for appropriate planning (1).
References
1. Top 3 healthcare M&A trends for 2023 | Healthcare IT News [Internet]. [cited 2023 Mar 16]. Available from: https://www.healthcareitnews.com/blog/top-3-healthcare-ma-trends-2023
2. DOJ withdraws certain health care antitrust enforcement guidance | AHA News [Internet]. [cited 2023 Mar 16]. Available from: https://www.aha.org/news/headline/2023-02-03-doj-withdraws-certain-health-care-antitrust-enforcement-guidance
3. Justice Department Withdraws Outdated Enforcement Policy Statements | OPA | Department of Justice [Internet]. [cited 2023 Mar 16]. Available from: https://www.justice.gov/opa/pr/justice-department-withdraws-outdated-enforcement-policy-statements