The past year has been ripe with antitrust activity in the health sector, with ripple effects likely to spill into the near future and beyond.
The Federal Trade Commission is poised to get even more aggressive in enforcement against anticompetitive deals in the years to come, legal experts told Healthcare Dive, while state legislatures are eyeing ways to increase scrutiny of mergers and acquisitions in their own backyards.
The FTC said last year it was expanding a program that helps it police future and already-consummated deals. And just last year the agency made its first challenge to a hospital tie-up after a three-year lull.
The FTC sought to block a hospital merger in Philadelphia, Jefferson Health's proposed buy up of Albert Einstein Healthcare Network. The last such deal the FTC blocked was in 2017 when Sanford Health sought to acquire Mid Dakota Clinic, the FTC previously told Healthcare Dive. However, after losing its bid in court to stop the Jefferson Health deal, the FTC will no longer seek to block it, the agency confirmed Monday in its case summary.
Amid that backdrop, Biden's nominee for the nation's top health regulator, Xavier Becerra, could also be a factor. During congressional hearings last week he told the health committee he would continue the push he made as California's attorney general against anticompetitive practices and providers that "unfairly jack up prices."
FTC looks to expand arsenal
The agency has been looking at several ways to broaden its arsenal to scrutinize mergers.
The FTC last year said it would beef up a key tool to help police anticompetitive tie-ups.
Some legal experts said the move to expand its retrospective merger review program sent a signal the agency would become more aggressive when reviewing deals.
In the past, the FTC examined healthcare mergers rather rigidly, according to Rani Habash, a partner at the firm Dechert, assessing competition in the same geographic market and for the same services. But they're likely to turn their attention to adjacent markets and the effects of those mergers, Habash predicted.
"They want to try to develop potentially new theories of harm," Habash said. "The concern would be that you could leverage your power in one area where you have no competition in order to get higher rates in the other area where you have more competition."
The agency also is on the hunt to measure the effects of physician consolidation and has asked the nation's largest insurers to hand over data so it can examine the issue more closely. The move comes amid concerns that provider markets across the country are too concentrated.
Further, last year the agency began a study on Certificates of Public Advantage, the laws state legislatures pass to shield mergers from federal antitrust enforcement.
It will be important for industry to keep an eye on what the merger review yields, particularly as insurers begin to comply with those orders and hand over relevant information.
Becerra's antitrust lens on rulemaking
As California attorney general, Becerra secured a $575 million antitrust settlement in a case against Northern California's giant Sutter Health.
Buzz has swirled about what his nomination could mean for antitrust enforcement given his resume in California. Even though HHS does not have jurisdiction over mergers and acquisitions, he would likely be sensitive to the competitive implications of any rules the agencies he oversees may implement if his nomination is approved, some legal experts said.
A potential focus on antitrust from Becerra would be a welcome change for some.
"When I look at certain regulations, sometimes they look to me to be either anticompetitive, in that they may raise the barrier to entry, or they may actually elevate the prices that people charge," Habash said.
Tim Greaney, an antitrust expert and professor at University of California at Hastings, agreed, noting that prior HHS policies have sometimes encouraged consolidation.
He pointed to the site of care policy that allowed hospital-owned centers to receive higher Medicare reimbursement than an independent physician group. Ultimately, it incentivized hospitals to buy physician practices to pull in higher payments.
Ripple effects from Sutter settlement
The blockbuster Sutter settlement in California may invite increased scrutiny of dominant providers in other regions of the country.
The settlement resolved allegations that the largest system in Northern California drove up prices through its anticompetitive practices.
Some legal experts think it might inspire other private groups to file suit.
"It might invigorate a few more suits, private suits, because remember the Sutter case was initially brought and settled by the grocer's union," Greaney said, noting many markets in the U.S. have a dominant health system.
Still, he cautioned the cases are time-consuming and an uphill battle for state AGs with fewer resources. Greaney said he's been focused on what state legislatures can do to curb market power, which may be more effective and speedier than legal pursuits.
The Sutter case alone produced 16.9 million pages of documents from more than 160 parties over the course of 30 months, according to a motion from the case, detailing the extraordinary discovery period.
"Particularly with even greater attention being given to single-firm conduct in the high-tech industries, expect continued interest from federal and state regulators in the competitive effects of actions taken by 'dominant' local and regional health systems," Jim Burns, a partner at the firm Akerman, said recently in a post highlighting potential antitrust activity in 2021.
Healthcare deals may also soon face greater scrutiny at the state level.
A few states legislatures have considered bills that would force merging entities to give prior notice to states before the mergers can occur.
Even though certain deals may warrant flagging federal regulators, states can be left out of the process. That can leave them blind to the market dynamics on the ground, which can result in mergers and acquisitions that over time can lead to an overly consolidated market in certain specialties.
California weighed a bill last year that would have required the state AG to approve most healthcare deals, not just hospitals, prior to a change in control. It did not clear both chambers.
The bill required a health system, private equity group or hedge fund to alert the state AG and receive consent prior to any consummation of a deal.
Similar measures are being considered in Indiana and Florida, according to Burns, who is closely tracking the issue.
"The trend of state legislatures introducing and passing premerger clearance laws is going to continue," Jonathan Grossman, co-chair of Cozen O'Connor's antitrust division, said.