White House Announces New Health Care Competition Initiatives Targeting Private Equity

• The White House recently announced that the DOJ, FTC and HHS will examine the role of private equity in competitive conditions in the health care sector and will work together to identify potentially anticompetitive roll-up transactions involving health care entities.
• The focus on private equity – and on private equity in health care in particular – is in line with several recent DOJ and FTC statements and actions.

Last week, the White House released “FACT SHEET: Biden-⁠Harris Administration Announces New Actions to Lower Health Care and Prescription Drug Costs by Promoting Competition.” The release contains two notable initiatives related to health care M&A involving private equity.

First, according to the White House announcement, the Antitrust Division of the U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC), together with the Department of Health and Human Services (HHS), will conduct a request for information “to seek input about how private equity and other corporations’ increasing power and control of our health care is affecting Americans” and will then “identify areas for future regulation and enforcement prioritization.” This grows out of the administration’s concern that the “health care system is increasingly being financialized, with corporate owners like private-equity firms and others maximizing their profits at the expense of patients’ health and safety, while increasing costs for patients and taxpayers alike.” The details of the proposed request for information remain to be seen. In connection with the RFI, both the DOJ and FTC will appoint counsels for health care, and HHS will appoint a chief competition officer.

Second, the DOJ, FTC and HHS will cooperate to identify “anticompetitive ‘roll ups’ that currently evade antitrust review” but “may violate the antitrust laws.” According to the White House, “private equity firms, health insurers, and health systems sometimes use a ‘roll up’ strategy, in which a series of relatively small acquisitions can lead to the consolidation of a market and contribute to worse patient outcomes while increasing taxpayer costs.” The three agencies will share data “to the maximum extent possible” in order “to help the antitrust enforcers identify potentially anticompetitive transactions that might otherwise evade ready review by antitrust enforcers.” The release does not specify what types of data are to be shared among the agencies. Relatedly, HHS is releasing certain health care facility ownership data, in part to facilitate “analysis of trends on how market consolidation impacts consumers.”

These initiatives are the latest in a series of statements and actions reflecting the administration’s attention to private equity and competition in health care. For example, an Antitrust Division official recently said in a speech that the DOJ is “vigilant about roll-ups and transparency in ownership of healthcare entities,” and, with the FTC, shares a “commitment to enforcement against roll-up strategies and Section 8 interlocking directorate enforcement in healthcare.” In an earlier speech, the official said: “To the extent that private equity transactions and conduct are focused on short-term gains and aggressive cost-cutting in the health care space, they can lead to disastrous patient outcomes and, depending on the facts, may create competition concerns.”

The FTC has recently taken enforcement action against health care roll-ups. In a challenge to a series of private equity sponsored acquisitions of anesthesiology practices in Texas, the FTC is seeking, in addition to potential divestitures, broad relief against the private equity firm. This includes a request for an injunction against the firm engaging in “similar and related conduct” that could potentially hinder the firm’s ability to make future acquisitions in other markets. This contested matter is pending in federal court. A different FTC matter that was resolved with a consent order provides some insight into how the FTC might approach future deals it believes are part of a roll-up strategy. This matter involved private equity sponsored acquisitions of veterinary clinics. Here, in addition to divestitures, the FTC imposed “robust” provisions for prior approval and prior notice of the firm’s future veterinary clinic acquisitions depending on the location of the clinic to be acquired. According to the FTC, the provisions were included out of a concern that private equity firms “increasingly engage in roll up strategies that allow them to accrue market power off the Commission’s radar” (i.e., that are not reportable under the HSR Act) and the consent order “will ensure the Commission has full visibility into future consolidation and the ability to address it.”

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