White House and Agency Initiatives
On Dec. 13, 2023, the White House announced new efforts to lower healthcare and prescription drug costs, issuing a detailed Fact Sheet. Two of the initiatives focus on private equity investments in healthcare.
First, the White House announced that it has directed the antitrust agencies (the Federal Trade Commission and the Department of Justice, Antitrust Division) and the Department of Health and Human Services to issue requests for information from industry participants about “how private equity and other corporations’ increasing power and control of our health care is affecting Americans.” The antitrust agencies and HHS must then “identify areas for future regulation and enforcement prioritization,” depending on the feedback received.
Second, the Fact Sheet details a White House directive to the antitrust agencies and HHS to share data that may reflect “anticompetitive ‘roll ups’ that currently evade antitrust review” but “may violate the antitrust laws.” According to the Fact Sheet, these roll-up strategies can “lead to the consolidation of a market and contribute to worse patient outcomes while increasing taxpayer costs.”
In addition, a Dec. 7, 2023 press release issued by the Federal Trade Commission, Department of Justice and HHS referenced that the FTC would work with HHS and DOJ to share data that would “help identify potentially anticompetitive transactions that might otherwise evade review.” The data referenced in the press release likely includes information received by HHS’ Centers for Medicare and Medicaid Services (CMS) under a new November 2023 rule that requires disclosures of ownership of nursing homes and similar facilities.
According to CMS, this kind of transparency is warranted in light of heightened CMS concern “about the quality of care at nursing homes, especially those owned by private equity companies and other types of investment firms.” CMS has highlighted academic research suggesting that ownership of nursing home facilities by private equity companies and other types of investment firms can be associated with worse resident outcomes. The antitrust agencies may use this type of information to track roll-up strategies and private equity-backed consolidation in the nursing home space.
This interagency cooperation piggybacks off of a December 2022 memorandum of understanding between DOJ and HHS to share information about matters that may be of interest to the other agency. As McGuireWoods noted in a 2022 legal alert, data exchanged under that memorandum of understanding likely includes information received by HHS and its components gathered in investigations and information received about ownership and management when a facility becomes a participating provider in the Medicare and Medicaid programs.
Recent Statements of Antitrust Agency Leadership Related to Senior Living Facilities
Dating back to 2022, officials at the antitrust agencies have repeatedly stated that they “are focused on potential antitrust enforcement on private equity ‘roll ups.’ ” Specific to private equity ownership of senior living facilities, FTC Chair Lina Khan said in a recent interview that she believes there has been a trend of “greater expansion of private equity in healthcare markets.” She criticized this perceived development and referenced a study that she characterized as finding that “when private equity bought out nursing homes … you saw higher mortality rates,” concluding “that’s really overall what has stemmed our interest in taking a closer look at private equity.” This follows months of statements about private equity ownership in healthcare by both agencies.
- It is essential for companies to document the procompetitive impact of transactions, such as allowing for higher quality of care, an increase in patient access, increased efficiency and other benefits.
- Companies engaging in transactions involving senior living facilities should create or maintain a level of antitrust awareness in their business strategies and transaction documents.
- Transactions that do not present competitive issues (including in employment markets) are still unlikely to receive significant antitrust scrutiny.
- Transactions that are not subject to federal- or state-level review pursuant to statutes such as the Hart-Scott-Rodino Act still may be subject to investigation.
- Antitrust matters and merger analysis are fact-specific, and the antitrust risk of a transaction will depend on the facts involved.
The McGuireWoods antitrust team is skilled in merger analysis and working with parties to a transaction in all stages of merger clearance and stands ready to assist companies related to the issues outlined in this article.