Federal agencies seek information on private equity involvement in healthcare

Continuing their increased scrutiny of private equity (see our prior client alerts here and here), the Federal Trade Commission (FTC), Department of Justice, and Department of Health and Human Services have jointly launched an inquiry into private equity’s involvement in healthcare. The agencies are seeking information from the public to assist in the investigation.

In their request for information (RFI), federal antitrust enforcers seek public comment on transactions conducted by private equity funds, private credit funds, and real estate investments involving healthcare providers, facilities, or ancillary products. The agencies stated that they “are concerned that transactions may generate profits … at the expense of patients’ health, workers’ safety, and affordable healthcare for patients and taxpayers.” Various stakeholders should consider submitting comments in response to this RFI, to provide key facts, arguments, and data. The deadline for public comments is May 6, 2024.

Interested parties can submit information on a broad range of healthcare transactions, including those involving:

• Dialysis clinics
• Nursing homes
• Hospice providers
• Primary care providers
• Hospitals
• Home health agencies
• Home- and community-based services providers
• Behavioral health providers
• Billing and collection services
• Revenue cycle management services
• Support for value-based care
• Data/analytics services
• Payors
• Providers
• Facilities
• Pharmacy Benefit Managers (PBMs), and
• Group Purchasing Organizations (GPOs).

In our view, however, this does not appear to be a neutral request for information. For example, the FTC’s stated focus on the “impact of corporate greed in health care” suggests the agency’s adverse view of private equity.

“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,” commented FTC Chair Lina Khan.

Of particular interest are non-reportable transactions – acquisitions that fall below Hart-Scott-Rodino (HSR) transaction thresholds. The federal agencies intend to use the collected data and information to identify “potentially unlawful transactions that might otherwise sidestep review.”

The RFI comes amid increased state-level oversight of private equity acquisitions in healthcare as well. Ten states have enacted mandatory advance reporting requirements for any private equity-led healthcare transaction. Paralleling the purpose of the federal RFI, such legislation allows state agencies to review non-reportable deals that fall below the HSR threshold for notifying proposed deals.

Both sides of the political aisle are active on the state front. Earlier this month, Indiana’s governor signed into law the state’s own reporting legislation, which goes into effect July 1, 2024. Notably, this is the first notice statute passed by a Republican-controlled state legislature. Proposed legislation in California goes a step further: AB 3129 would require California Attorney General approval of private equity-led healthcare transactions. Additional states’ legislatures are reviewing bills to strengthen attorney general authority over healthcare deals.

Key takeaways

At the federal level, this RFI creates an opportunity for interested parties to provide a counterbalance to the agencies’ conjecture that private equity deals in healthcare could allegedly adversely affect patients. The FTC should hear from parties with wide ranging views to help the agency better understand the critical role that private equity plays in patient care.

As a strategic partner for private equity, DLA Piper is well positioned to help firms evaluate their strategy in responding to the RFI or, alternatively, in communicating with Congress and state legislators about any issues with the RFI or policies that may result from this process. DLA Piper can help private equity build relationships with key state and Washington, DC decisionmakers before they present an “ask,” and identify opportunities to steer the conversation. DLA Piper advisors can help private equity firms shape legislation and engage in government relations efforts to protect private equity interests, in light of the potential risks associated with evolving regulatory landscapes.