FTC Voices Its Disagreement With Hospital Association in Final HSR Rule

In June 2023, the Federal Trade Commission (Commission) proposed major changes to its premerger notification rules that implement the Hart-Scot-Rodino Act and impact a large swath of merger and acquisition transactions each year.

At the same time, the Commission invited interested parties to submit comments to the proposed changes to assist it in finalizing the rules. Subsequently, the Commission received more than 700 comments before issuing its Final Rule on October 10.(A comprehensive explanation of the key differences between the Commission’s proposed rule and the Final Rule can be found in this white paper.)

Among the comments received was a comment letter from the American Hospital Association (AHA), dated September 5, 2023. In the letter, the AHA argued that the Commission should withdraw the proposed amendments (except those needed to comply with certain recent legislation) and leave the current reporting regime in place. It asserted that “there is nothing broken about the [Commission’s] ability to screen hospital transactions for further review [and] [a]ccordingly, there is no need to subject hospitals to burdensome rules aimed at other sectors of the economy.”   

Notably, in the Final Rule, the Commission, as explained below, responding to the AHA’s letter rejects the AHA’s arguments and conclusions.

In its comment letter, the AHA challenged the premise underlying the proposed rule, i.e. that the information currently collected by the HSR Form is insufficient for the FTC’s teams to determine, in the initial 30 days, whether a proposed transaction may violate antitrust laws. The letter further stated that the proposed rule would have a negative and wholly unnecessary impact on hospitals and health systems.

The AHA noted that, since 2010, the Commission has filed 15 lawsuits challenging hospital mergers, including seven in the past three years, and that in at least two other instances during that time, the Commission closed investigations after the parties either (i) abandoned their transaction following staff’s recommendation to sue, or (ii) settled with a state attorney general. The AHA further stated that there is no shortage of third parties, including insurers and state officials, who stand ready to identify potentially harmful transactions.

In short, the AHA argued that the Commission does not need more information to identify hospital-related transactions that warrant closer review; the proposed amendments would impose a substantial and unnecessary burden on hospitals; and the Commission and the Antitrust Division of the Justice Department should be focused on ways to decrease, not increase, compliance costs to health care providers.

In the Final Rule, the Commission takes exception to the AHA’s comments, stating that the Final Rule does not target any information that is unique to hospitals and health systems, and disagrees that the additional information, when sought from hospitals, is not relevant. 

According to the Commission, an empirical assessment of the price effects of consummated hospital mergers reveals that there are meaningful information gaps in the current requirements that in fact have led the Commission to grant early termination of the waiting period for hospital mergers that then resulted in significant price increases.

Given its “significant expertise and interest in preventing hospital mergers that may violate the antitrust laws,” the Commission states that the Final Rule is appropriately focused on transactions that are most likely to present antitrust risk.

It further states that the Agencies have determined that the information sought by the Final Rule will close the information gaps that now exist with respect to hospital and other health care acquisitions. In that regard, it notes that because many hospital mergers are not reportable under the HSR Act, several states have enacted premerger notification laws for certain health care acquisitions, including those involving hospitals, to prevent consolidation that may affect their citizens directly.

In light of all this evidence of a need for robust screening in this critical sector, the Commission concludes that there is no basis to excuse hospitals or health systems from any of the new requirements of the Final Rule beyond the modifications that it is making in the Final Rule to reduce costs on filers overall, including on hospitals.

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