Page 16 - Modern Healthcare (January 2020)

Policy
Proposed guidelines on vertical mergers
disappoint antitrust experts
By Harris Meyer
That is what the agencies, as well as
state attorneys general, have examined
HEALTHCARE ANTITRUST experts
in recent vertical transactions. Those
are disappointed that the federal gov-
cases involved claims that acquisition of
ernment’s new proposed guidelines
on vertical mergers give little detail on firms, known as foreclosure.
physician groups by insurers or hospi-
how regulators will analyze deals be- tals may foreclose competition by mak-
tween organizations across the delivery ing it more difficult or costly for rivals to
system, such as hospitals and physi- obtain physician services.
cian groups. The cases showed a new willingness
While the Federal Trade Commission GETTY IMAGES/MODERN HEALTHCARE ILLUSTRATION by federal and state antitrust enforcers to
and U.S. Justice Department highlighted use seldom-cited vertical merger theory.
potential competition risks from vertical There is concern about Last year, the FTC announced a settle-
mergers in the long-anticipated guide- more unorthodox vertical ment with UnitedHealth and DaVita un-
lines, the first update since 1984, some deals like those between winding United’s acquisition of DaVita
elected officials and antitrust attorneys CVS Health and Aetna and Medical Group’s Las Vegas operations.
say the release still doesn’t give enough between UnitedHealth Colorado’s attorney general separately
information to step up oversight of phy- Group and DaVita. reached a deal imposing conditions on
sician practice acquisitions by hospitals, UnitedHealth’s acquisition of DaVita’s
insurers and private-equity firms. physician groups in Colorado Springs.
“They don’t really do much new, and firms competing head to head. Antitrust
they don’t refer at all to healthcare or use enforcers and courts traditionally have Also last year, the 8th U.S. Circuit
any healthcare-related examples,” said viewed vertical mergers as much less Court of Appeals upheld a U.S. District
Douglas Ross, a veteran antitrust attor- likely to threaten competition than hori- Court ruling blocking Sanford Health’s
ney at Davis Wright Tremaine in Seattle. zontal mergers. proposed acquisition of the multispe-
Vertical mergers create some specific But the new guidance included some cialty Mid Dakota Clinic in the Bis-
competitive risks including preventing surprises, according to Debbie Feinstein, marck, N.D., area. That antitrust case
rivals from accessing products from the a former top FTC official who heads Ar- originally was filed by the FTC and the
downstream merger partner, sharing nold & Porter’s global antitrust group. North Dakota attorney general.
sensitive business information about It proposed a safe harbor for vertical Researchers say there’s little evidence
competitors and enabling coordinated mergers if the merging firms have a com- that such consolidation has enhanced
interaction that hobbles rival firms. bined share in the relevant market of competition and produced benefits
The guidance update, released ear- less than 20%, and the “related product” such as lower costs and better quality.
lier this month, comes as concerns produced by the downstream partner is While FTC Chairman Joseph Simons
mount over the growing consolidation used in less than 20% of the market. said the agencies’ vertical merger policy
of hospitals and physician practices and That’s widely seen as an unusually “has evolved substantially” since 1984
the impact on prices and total health low threshold, given that antitrust en- and maintained that challenging such
spending. There is also con- forcers generally rule out mergers is “essential” for enforcement,
cern about more unortho- action on mergers affect- his Democratic colleagues were less en-
dox vertical deals like those THE TAKEAWAY ing less than 30% of a mar- thused about the new guidance.
between CVS Health and ket at the very least. Both Democratic FTC commis-
Aetna and between United- Some experts Feinstein also said the sioners abstained from voting on the
hoped the Justice
Health Group and DaVita. Department and draft has “no real discus- guidelines. In a written statement,
The federal government Federal Trade sion” of the standards by Commissioner Rohit Chopra said “they
has rarely challenged verti- Commission would which the agencies will are not supported by an analysis of past
cal mergers in any industry, signal tougher evaluate the ability of merg- enforcement actions, perpetuate an
in contrast to its more ag- scrutiny on vertical ing companies to reduce or overdependence on theoretical mod-
gressive policy toward hor- merger deals in the cut off the supply of down- els, and do not reflect all of the ways that
izontal mergers between future. stream products to rival competition can be harmed.”l

14 Modern Healthcare | January 27, 2020