FTC proposal could slow health care M&A

Health care companies pursuing mergers would have to disclose more information about the transactions under a new Federal Trade Commission proposal that could slow health care deal-making.

The antitrust agency voted Tuesday to publish a proposed rule that would, in part, require merging parties to disclose any minority investors in an effort to weed out any conflicts of interest; information about prior acquisitions; supplier agreements; subsidies from foreign entities; and workforce data, including information on executives and board members. The FTC estimated the requirements would add an average of 107 hours to the current average time of 37 hours that it takes to prepare a merger filing.

Additional detail on transactions could give the agency more ammunition to challenge merger proposals. It could also expedite merger reviews if the expanded notification requirements limit the FTC’s subsequent information requests.

If approved, the changes would be the first update to the Hart-Scott-Rodino Act premerger notification program in 45 years. The proposed rule will be published in the Federal Register later this week, and there will be a 60-day comment period before the rule is finalized—a process that would likely take months.

“Transactions are increasingly complex, in both deal structure and potential competitive impact. Investment vehicles have also changed, alongside major transformations in how firms do business. The [Hart-Scott-Rodino] form, meanwhile, has largely stayed the same,” FTC Chair Lina Khan and commissioners Rebecca Kelly Slaughter and Alvaro Bedoya said Tuesday in a joint statement.

The proposal is part of the federal government’s effort to clamp down on anticompetitive mergers and acquisitions. The FTC is in the process of updating its merger guidelines, which will factor in worker-specific impacts of transactions, among other issues.

The agency has challenged several major hospital transactions over the past two years, scuttling each proposal. A backlog at the FTC also caused delays in the merger of Spectrum Health and Beaumont Health that ultimately led to formation of Corewell Health.

Whether the FTC formally intervenes or not, delays can kill merger attempts. For example, Santa Barbara, California-based Cottage Health and Sansum Clinic called off their proposed merger in 2017 after battling regulatory concerns for years. Merging parties’ expenses increase the longer it takes to move from a letter of intent to closing, potentially diluting the value of the transaction.


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