On December 27, 2020, the Consolidated Appropriations Act (CAA) became law and attracted major attention based on the economic stimulus components that were included to address the ongoing pandemic. There are a few important provisions that provide some new authority for the Federal Trade Commission (FTC) that may lead to more merger challenges in health care.
Congress gave the FTC new directions to collaborate with the Attorney General and the Secretary of Health and Human Services in examining the health care industry. Specifically, regulators are to study the integration of health care facilities, health care providers, and health insurers, as well as trends regarding overall costs of and access to health care. Of particular importance is that the CAA requires the FTC to consider how to address anti-competitive consolidation of health care facilities, providers or insurers. The study and report, to be completed by January 1, 2023, are just the first in a series of five such studies and corresponding reports, each to be completed annually through 2027.
In light of the FTC’s new directive, health care organizations can likely expect increased scrutiny over the next six years, especially for mergers and acquisitions. Based on the new directive in the CAA, the FTC may increase its focus on mergers and acquisitions within health care, which is an area where there was already considerable attention.
Although the FTC lost its challenge to the proposed merger between Philadelphia-based Jefferson Health and Einstein Healthcare Network when an appellate court on December 21, 2020 denied the Federal Trade Commission’s latest attempt to block the merger, the FTC had argued that the combination of the two systems, which comprise 17 hospitals, would reduce competition in two counties and lead to price increases.
Despite that setback, in December, 2020, the FTC announced that it filed an administrative complaint, and authorized a suit in federal court, to block Hackensack Meridian Health, Inc.’s proposed acquisition of Englewood Healthcare Foundation based on the fact that the merged health care system would control three of the six inpatient general acute care hospitals in Bergen County, New Jersey and leave insurers with few alternatives for inpatient general acute care services. The FTC also asserted that the elimination of competition would reduce incentives to improve quality.
Xavier Becerra, the new Secretary of Health and Human Services and the former Attorney General of California, is expected to monitor transactions and look over any arrangements that threaten to impact access to affordable health care.
Providers and payers should expect that merger or consolidation plans may be challenged and be prepared to demonstrate pro-competitive reasons to support the planned transactions.