Strategic Partnerships Mergers and Acquisitions

Responses to a new RFI will help guide regulations addressing consolidation and private equity in healthcare

Although the administration is interested in the ramifications of deals initiated by payers and health systems, it’s evident that PE transactions represent the biggest concern.

March 13, 2024 12:03 pm

The Biden administration is ramping up its assessment of how to regulate consolidation and private equity (PE) acquisitions in healthcare, issuing a request for information (RFI) from stakeholders.

There is a deadline of May 6 to submit comments on the RFI, which was distributed by HHS, the Department of Justice (DOJ) and the Federal Trade Commission (FTC).

“Given recent trends, we are concerned that transactions may generate profits … at the expense of patients’ health, workers’ safety and affordable healthcare for patients and taxpayers,” the RFI states.

One technical concern expressed in the RFI is that individual PE transactions might not be big enough under federal law to attract antitrust scrutiny but still would promote excessive consolidation in a market when taken together.

“These transactions could involve dialysis clinics, nursing homes, hospice providers, primary care providers, hospitals, home health agencies, home- and community-based services providers, behavioral health providers, billing and collections services, revenue cycle management services, support for value-based care, data/analytics services, and other types of healthcare payers, providers, facilities, pharmacy benefit managers, group purchasing organizations, or ancillary products or services,” the RFI states.

The purpose of the RFI

“Public comments submitted in response to this request for information will inform the agencies’ identification of enforcement priorities and future action, including new regulations, aimed at promoting and protecting competition in healthcare markets and ensuring appropriate access to quality, affordable healthcare items and services,” the agencies stated.

Areas of focus in the RFI include transactions conducted by:

  • PE funds or other alternative asset managers, including private credit funds and real estate investment trusts
  • Health systems, including transactions involving either vertical (e.g., acquisitions of physician practices) or horizontal integration
  • Private payers, including purchases of providers, pharmacies, facilities or ancillary products or services

The perceived impact of transactions in which health systems acquire physician practices has fed the increasing support in some policy circles for site-neutral payment rules.

A recent RFI about Medicare Advantage (MA) data collection asked about the need for data on issues that affect healthcare competition, including whether vertical integration in MA is cause for concern. Comments on that RFI can be submitted through May 29.

Specific issues to be addressed in the new RFI on consolidation include:

  • The demonstrated effects of consolidation on patients; public and private payers; providers, healthcare workers and support staff; and employers
  • The stated business goals and objectives for transactions, and whether they were achieved
  • The types of transactions and purchasers that most tend to be associated with adverse impacts
  • Recommended actions for government agencies in response to the highlighted issues

Wary about PE activity

PE acquisitions appear to be the biggest M&A concern for analysts and regulators. During a March 5 workshop hosted by the FTC, Eileen Applebaum, PhD, co-director of the Center for Economic and Policy Research, said PE investments in healthcare increased 25-fold between 2010 and 2020.

“Private investments can sometimes be an important source of capital, especially for small to mid-size companies that can benefit from the access that this financing provides,” Lina M. Kahn, chair of the FTC, said during the workshop. “Some private equity firms take a more long-term view and focus on creating real operational improvements to generate value in ways that provide broader benefits, but we’ve also seen some private equity firms take a different approach.”

Jonathan Kanter, assistant attorney general with the DOJ’s Antitrust Division, recalled the positive experience he recently had while accompanying a loved one who underwent lifesaving surgery at a community hospital.

“The levels of care and attention from the nurses, the doctors, the aides, the technicians were unheard of by today’s standards,” Kanter said. “I can’t help but think that type of care occurred because of the community nature of that hospital. That type of care must be protected even when it doesn’t comply with a spreadsheet.”

PE transactions in healthcare generally represent a distinct concern from acquisitions by for-profit companies, Applebaum said.

“A for-profit company may buy up a healthcare company, [but] usually [the buyer] will be a company that has experience in healthcare,” she said. “It will be buying this company to hold it for the long term.”

VBP a lure for PE

CMS needs to make sure value-based payment (VBP) programs do not promote takeovers by outside firms amid struggles by some traditional providers to generate the resources needed to succeed in those models, Jonathan Blum, CMS’s principal deputy administrator and COO, said during the workshop.

“We want to lower those [participation] costs,” Blum said.

Applebaum said CMS’s capitated VBP contracts can have unintended consequences as outside entities increasingly see an opportunity to enter the industry and profit from such models.

“We see that taking care of patients and making them healthier is not the only way that you can hold down costs,” she said. “You can hold down costs by denying patients the care that they really deserve.”


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