FTC extends comment period for consolidation, anticompetitive practices in health care

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The Federal Trade Commission (FTC) is extending the time to comment on effects of consolidation in the health care sector.

The FTC and the U.S. Department of Justice (DOJ) have an open joint request for information for details on serial acquisitions and roll-up strategies and how those have led to consolidation that hurts business competition. The new deadline is Sept. 20; previously the deadline was July 22.

“When private equity firms buy out health care facilities only to slash staffing and cut quality, patients lose out,” FTC Chair Lina M. Khan said in a news release earlier this year. “Through this inquiry the FTC will continue scrutinizing private equity roll-ups, strip-and-flip tactics, and other financial plays that can enrich executives but leave the American public worse off.”

Anticompetitive practices?

The request “seeks information on serial acquisitions and roll-up strategies in which corporate actors, including private equity owned businesses, become larger – and potentially dominant – through acquisitions of several smaller firms in the same or related business sectors or industries,” said FTC news release of July 19.

“Often, businesses do not have to report these deals to the federal antitrust agencies, allowing firms to amass significant control over key products, services, or labor markets without government scrutiny,” the FTC announcement said. “These types of transactions can harm competition to the detriment of consumers, workers, and innovation across an entire industry or business sector.”

So far, the request drew 320 comments, mostly from what appear to be named or anonymous individual people. But two organizations weighed in.

‘Overenforcement’

The U.S. Chamber of Commerce has encouraged the federal regulators to initiate studies about business mergers before revising merger rules, said a letter from Sean Heather, senior vice president for international regulatory affairs and antitrust.

“We are concerned, however, that the agencies have designed this RFI to solicit only negative information about acquisitions, rather than to gather information on a neutral basis,” Heather said. “Such a biased approach could lead to misguided enforcement.”

He cited specific concerns:

• The analysis should be objective and empirical, but it appears the request and its queries “cast acquisitions in a negative light, rather than to elicit objective facts and fair-minded analysis regarding their costs and benefits.”
• The agencies ignore that “the vast majority of mergers are either procompetitive and enhance consumer welfare or are competitively benign,” at least for the past four decades and under Republican or Democratic administrations.
• Instead of investigating a particular industry, the agencies should issue a public report and investigate competitive harm on a case by case basis.

“Sweeping investigations may garner headlines but are likely to lead to overenforcement and the chilling of pro-competitive activity,” Heather wrote.

‘Anti-patient practices’

The independent organization American Economic Liberties Project (AELP) submitted an executive summary and full copy of its December 2022 report, “The Roll-Up Economy: The Business of Consolidating Industries with Serial Acquisitions.”

“Whether it is magic mushrooms, youth addiction treatment centers, mobile home parks, nursing homes, comedy clubs, ad agencies, water bottles, local newspapers, or health care practices, many local businesses normally thought of as independent are being swept up in serial acquisition sprees,” the executive summary said.

The full report included a private equity case study specific to physicians’ practices. In 2019, health care company Envision made the for its surprise billing practices. Congress then passed the No Surprises Act in early 2021. But that issue led to research on “anti-patient practices” that health care businesses could get away with because they had consolidated through serial acquisitions, according to the report.

Envision then-owner KKR, a private equity firm, had raised $1.45 billion to invest in health care. But as it acquired practices, most of the individual deals did not meet the threshold for FTC regulatory scrutiny, according to the AELP report.

Private equity investment deals ballooned from 352 in 2010 to 937 in 2020, and those figures likely were undercounted due to small deals that were not publicly known. The roll-up strategies include acquisitions of family medicine doctors, the report said.

More comments

DOJ’s Antitrust Division also this year began a new web portal for the public to comment about anticompetitive business practices in health care. Learn more at HealthyCompetition.gov.