Thought Leadership

New Year, New Guidelines: FTC/DOJ Bring Scrutiny to Healthcare M&A’s

Evan Harris
By Evan Harris
posted Jan 12, 2024

Antitrust experts, lawyers and the healthcare industry got a special treat before the 2023 holiday season with the release of the final “The 2023 Merger Guidelines” from the Federal Trade Commission and U.S. Department of Justice on December 18.

The guidelines took two years to draft but make one thing clear: federal regulatory review of merger and acquisitions will likely broaden under the new rules. The final guidelines could play a major role in the preparation, planning, and success of health care mergers, especially for health care systems.

Why It Matters

The final guidelines could play a major role in the preparation, planning, and success of health care mergers, especially for health systems. Health systems need to follow similar rules to other industries when merging, such as state and federal requirements under the Hart-Scott-Rodino Act. Along with tough negotiations with health insurers, regulatory scrutiny and challenges in the traditional delivery of healthcare, the increased scrutiny of mergers and acquisitions will only add more fuel to the fire of the obstacles already faced by healthcare leaders and staff this year. This all comes at a time when hospitals and health systems continue to be the brunt of reputational attacks in the media.

What the New Guidelines Mean for Healthcare Mergers Today

Right now, nothing. While the final guidelines have no legal precedent, Revive learned firsthand from the FTC that the final guidelines are retroactive. Any current health care mergers and acquisitions in process or under review as of issuance of the guidelines in December 2023 may be subject to additional review.

How Can Health Systems Prepare for Additional Scrutiny

The health care industry will need to see how the first legal rulings play out before there is any clarity around the final guidelines and federal reviews.

Until then, health systems can prepare for heightened scrutiny by following a few best practices in navigating M&A:

  • Plan for legal and regulatory challenges – Be ready for challenges in the courts and from state and federal regulators. Even a strong case supporting a merger and acquisition could draw scrutiny from those looking to prevent a deal. Legal action or regulatory pushback may not stop a deal if health systems are willing to make their case in legal arenas, but it could significantly slow down the process, stretching out the deadline for the deal close and increasing costs. Be proactive to prepare your case (literally) for a merger or acquisition and assume longer timelines and delays may occur. The U.S. Chamber of Commerce also estimated that the final guidelines could increase the cost of a single merger by five times more than originally thought.
  • Be the primary communicator about the benefits of the deal – Don’t wait for regulators or those opposed to the merger and acquisition to frame it as anticompetitive. Pursue proactive messages about the deal. Explain the benefits and explain how the deal will be a positive outcome for the patients served by each hospital and health system. Decide who – CEO, board, physician leaders – will carry these messages throughout the deal.
  • Engage regulators and lawmakers – Communicate with lawmakers and regulators early and often. Emails, an in-person visit, an explanation about how their district or the region could be impacted by a merger. Don’t let lawmakers or their staff guess what is happening or where the deal stands. Ensure they understand the benefits of a merger or acquisition and educate them about the deal process.
  • Overcommunicate with your audiences – Mergers and acquisitions between health systems are scrutinized. You need to consider a strong communications plan that will share key details consistently with a range of audiences and stakeholders. Your messages will need to inform everyone from current employees and physicians to the media, community leaders and the public. Extra communications and easily accessible information about the deal will alleviate concerns throughout the merger and acquisition process. 

Want to talk more about health system mergers and acquisitions? Reach out to our team to learn more.