The Government Wants Your Input on Consolidation in Healthcare

The US government–specifically the Department of Justice, Department of Health and Human Services, and the Federal Trade Commission–is asking for public input about consolidation in healthcare.

A summary quote from FTC Chair Lina Khan from an article in the WSJ:

FTC Chair Lina Khan said that while some private-equity investment could be beneficial, too many buyout firms focus on profit to the detriment of medical care. Government regulators have heard numerous reports from doctors and other medical workers about the negative consequences of private equity-driven consolidation.

The comment period runs until May 6, 2024, and you can only submit feedback through this official docket on the website.

For further reading, remarks delivered by FTC Chair Lina Khan on March 5:

One issue we see is that short-term, high-risk, and low-consequence ownership can encourage a “flip and strip” approach. Often, private equity firms will “use large amounts of debt to acquire companies,” with the goal of increasing “profits quickly so they can resell” and reap returns a few years later. Health care workers report staffing cuts and increased hours that worsen patient care in a range of ways, from longer wait times before a nurse can bring a patient pain medicine or help them get to the bathroom to increased falls and accidents as a consequence of fewer staff available to assist patients.

These short-term profit-extracting strategies can undercut long-term value, and, in the context of health care, have life-or-death consequences. For example, one study estimated that private equity takeovers of nursing homes and the staffing cuts that followed have led to increased mortality rates—specifically around 20,000 excess deaths among nursing home patients over the course of just 12 years.

After noting the slash and extract model, Khan moves on to the roll-up:

A second practice that we’ve seen private equity firms deploy is rolling up markets through serial acquisitions and a “buy-and-build” model that firms can use to consolidate power and undermine competition. By consolidating power gradually and incrementally, through a series of smaller deals, firms have sometimes sidestepped antitrust review. In the aggregate, these roll-up plays can eliminate meaningful competition and allow new owners to jack up prices, degrade quality, and neutralize rivals without competitive checks.

This is the basis for the FTC’s lawsuit against Welsh Carson and US Anesthesia Partners. For reference, Welsh Carson also owns US Radiology Specialists, which has purchased several outpatient imaging chains over the past few years including Touchstone, American Health Imaging, and Gateway Diagnostic Imaging.

And lastly, from the official PDF Request for Information:

The Department of Justice’s Antitrust Division, the Federal Trade Commission, and the Department of Health and Human Services (collectively, the “agencies”) believe that robust competition in health care markets promotes lower health care costs and improved working conditions, while fostering high-quality patient care and driving innovation across the health care system. Given recent trends, we are concerned that some transactions may generate profits for those firms at the expense of patients’ health, workers’ safety, quality of care, and affordable health care for patients and taxpayers. We are issuing this Request for Information to seek public comment regarding the effects of transactions involving health care providers (including providers of home- and community-based services for people with disabilities), facilities, or ancillary products or services, conducted by private equity funds or other alternative asset managers, health systems, or private payers. We are interested in public input regarding the goals or objectives of these transactions, as well as their effects on participants in the health care market including patients, communities, payers, employers, providers, and other health care workers and businesses.

We are particularly interested in information on transactions in the health care market conducted by private equity funds or other alternative asset managers, health systems, and private payers, especially those transactions that would not be noticed to the Department of Justice and the Federal Trade Commission under the Hart-Scott-Rodino Antitrust Improvements Act, 15 USC 18(a). 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 health care payers, providers, facilities, Pharmacy Benefit Managers (PBMs), Group Purchasing Organizations (GPOs), or ancillary products or services. We are also interested in hearing directly from patients and health care workers about how their experiences in the health care system changed after a facility or other provider where they work or receive treatment or services was acquired or underwent a merger.

Again, you have until May 6 to submit your comments to the US government.

Leave a Reply