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What Healthcare Systems Need to Know About President Biden’s Executive Order to Promote Competition | Hogan Lovells


The EO follows a year of active antitrust enforcement in the area of ​​hospital mergers, but it signals that hospital mergers and acquisitions (and other vendors) will be subject to review. even more in-depth review in the future. Healthcare systems considering transactions with another healthcare system, insurer, or large group of physicians should therefore be prepared to engage with federal and state antitrust authorities and fully explain the competitive landscape in their region and how. the transaction will benefit patients, employers, and insurers in their region.

Even before the OE, health system mergers and acquisitions were the focus of attention of the FTC, as well as state attorneys general. In 2020, the FTC challenged three hospital mergers after conducting lengthy investigations: the Thomas Jefferson University healthcare system’s acquisition of the Einstein Healthcare Network in the Philadelphia area; the proposed acquisition by Methodist Le Bonheur Healthcare of two hospitals, called Saint Francis, of Tenet in Memphis, Tennessee; and the proposed acquisition of Englewood Healthcare by Hackensack Meridian Health in Bergen County, New Jersey. Methodist Le Bonheur and Tenet abandoned their transaction shortly after the FTC challenge, and litigation is pending in the Hackensack Meridian / Englewood transaction. Einstein (represented by Hogan Lovells) and Jefferson Health defeated the FTC’s offer to block the deal and plan to close in 2021.[1]

Despite the loss of the FTC in the Jefferson / Einstein litigation, the acting deputy director of the FTC’s Mergers IV division and the FTC’s lead counsel for the case said it would be a mistake to assume that the deal would lead the FTC to curb the hospital merger that went into effect.[2] Likewise in 2020, Commissioner Rebecca Slaughter specifically named healthcare as one of the few key industries where “[t]he American public wants antitrust agencies. . . to fight against market power ”and that“ now [the FTC] has the opportunity to take their application to the next level.[3] The FTC also launched a retrospective study on the impacts of consolidating physician groups and healthcare facilities from 2015 to 2020.[4] In addition, the FTC held a public meeting of commissioners on July 1, 2021, signaling that “Today’s FTC is ready to meet the challenge of the modern economy” and including healthcare companies and hospitals. on its application priority list.[5]

Congress has also shown bipartisan support for further antitrust scrutiny in the healthcare sector. For example, on May 21, 2021, the Senate Judiciary Committee’s Subcommittee on Competition, Politics, Antitrust and Consumer Rights held a hearing titled “Antitrust Applied: Hospital Consolidation Concerns and Solutions”, with Senators on both sides of the aisle indicating they are concerned about the loss of competition and the impact on patients of consolidating health care providers.

While recent history shows that the FTC has an active antitrust enforcement program in place with respect to hospital mergers, the EO highlights the attention the federal executive and legislature will give to consolidation of suppliers in the months and years to come. It also makes it clear that the FTC, now under the leadership of Biden-nominee and chairman Lina Khan, will take a closer look at hospital transactions subject to the agency’s review. In addition, the OE directs the United States Department of Justice (“DOJ”) and the FTC to review the horizontal and vertical merger guidelines and consider whether to revise those guidelines. This review and the potential revision of the guidelines could significantly alter the framework that antitrust agencies apply when investigating or challenging a transaction.

Now more than ever, hospitals and healthcare systems considering mergers and acquisitions – whether with another healthcare system, an insurer, or a large group of physicians – should assess the potential antitrust risk associated with a transaction. proposed early in negotiations and develop a strategy for engaging with federal and state antitrust authorities. It is also extremely important that healthcare systems are able to explain their rationale for the transaction and the competitive advantages associated with the agreement, and allow sufficient time in their transaction timeline to engage with antitrust authorities. and comply with voluntary requests for information and secondary requests. In some cases, it may be necessary for the parties to undertake detailed integration planning in order to clearly demonstrate the potential benefits of the agreement to the authorities. Ultimately, having an antitrust lawyer early in the transaction process can help healthcare systems plan and manage a potential investigation by federal and state antitrust law enforcement agencies.

Non-compete agreements – sometimes referred to as “no-poaching agreements” – have also recently come under the microscope by federal antitrust authorities. In 2021, the DOJ initiated criminal proceedings against at least three healthcare facilities and their leaders in connection with alleged no-poaching agreements. But antitrust agencies are not only concerned about so-called bare deals between companies not to compete for workers, they are likely to extend their concern to restrictions on competition for workers that were previously considered permitted by the law. federal and state law. The EO, which says that “the consolidation has increased the power of corporate employers, making it more difficult for workers to negotiate higher wages and better working conditions,” confirms that antitrust agencies under the Biden administration will continue to enter into existing non-compete agreements and other restrictive enforcement priorities. At this point, it is not clear how antitrust law enforcement agencies might view common clauses in physician employment contracts: relatively short-term non-compete clauses that are confined to a small area. local and negotiated in exchange for guaranteed compensation. Therefore, employers in the healthcare sector should continue to assess whether their existing employment contracts or model contracts include non-competition clauses and how these clauses might affect competition for employees. Employers should consider incorporating this assessment into their compliance programs and consult an antitrust lawyer regarding non-compete agreements in the future.

[2] Mucchetti, P., Braun, C., Oliver, L., Seidman, M., Welsh, E. (March 24, 2021). Hospitals under the microscope. Section 69 of the American Bar Association Antitrust Lawe Spring meeting on antitrust law.

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