Private Equity’s Role in Healthcare Is Under Antitrust Scrutiny

According to an article by Covington, the Department of Justice (DOJ), the Federal Trade Commission (FTC), and Health and Human Services jointly issued a Request for Information seeking comments about private equity’s role in healthcare, including acquisitions of healthcare providers and related entities.

Covington says that prior RFIs have resulted in investigations and enforcement actions, and there is reason to believe this one will too. It may be a precursor to an FTC study, which would involve broad document subpoenas targeted at industry participants, and public investigations and enforcement actions from federal or state enforcers.

The RFI asks for information on the effect of healthcare transactions on patients, payers, healthcare providers, their workers, and employers who provide health insurance. It lists potential effects for each, mostly concerning cost and quality of care.

The virtual workshop and FTC Chair Lina Khan’s opening remarks revealed the agencies’ investigatory agenda. Khan acknowledged that private investment can sometimes be an important source of capital, but highlighted three strategies she views as concerning from an antitrust perspective. Other panelists followed suit.

The three strategies include:

• So-called “strip and flip” deals, which Khan described as “using large amounts of debt to acquire companies to increase profits quickly so that the acquirer can resell and reap returns a few years later”
• Serial acquisitions that consolidate power incrementally by using deals small enough to evade antitrust review
• Buying significant shares in multiple competitors, thus creating incentives to consider common ownership interests in decisions about pricing and output.

Covington suggests consulting antitrust counsel early when evaluating an acquisition, and taking the opportunity to submit comments (which will be publicly available). The deadline to submit comments is May 6, 2024.