May 18, 2024
Equity

U.S. launches inquiry into private equity healthcare deals

The Biden administration is seeking public comments on small acquisitions by private equity companies in the healthcare industry.

The Federal Trade Commission, Justice Department and Department of Health and Human Services said in a request for public comments published March 5 that they are seeking information on deals that weren’t reported to the federal antitrust agencies.

Under the law, mergers valued at more than $119.5 million must notify the federal antitrust authorities and wait at least 30 days before closing. However, transactions under that threshold don’t need to be reported.

“When private equity firms buy out healthcare facilities only to slash staffing and cut quality, patients lose out,” said FTC Chair Lina Khan. “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.”

The Biden administration has taken an increased interest in private equity transactions, particularly “roll-ups” where a firm makes an initial acquisition and proceeds to acquire numerous businesses in the same sector. The antitrust agencies are also probing the influence private equity firms have on boards across corporate America.

The Justice Department has been examining Blackstone, Apollo Global Management and KKR & Co. amid concerns that board directors with seats on rival firms in the same sector could influence those companies to act in ways that maximize gains for all — instead of competing vigorously to provide the best services or lowest prices to consumers.

Meanwhile, the FTC has zeroed in on private equity in healthcare markets. Last year, the FTC sued US Anesthesia Partners and its private equity partner Welsh Carson Anderson & Stowe, alleging they engaged in a scheme to monopolize the market for anesthesiologists in Texas using the “roll-up” strategy.

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