Blockbuster transactions in the ambulatory surgery center (ASC) industry and health care sector could see more scrutiny moving forward.
On Oct. 10, the Federal Trade Commission (FTC) voted unanimously to issue new final rules that effectively make the pre-deal notification and regulatory review process more comprehensive.
“The final rule implements changes that will improve the ability of the FTC and Antitrust Division of the U.S. Department of Justice (DOJ) to detect illegal mergers and acquisitions prior to consummation,” the commission wrote in its Oct. 10 announcement. “The final rule requires additional information that is necessary to determine which deals require an in-depth antitrust investigation, including through the issuance of Second Requests.”
FTC typically requests more information on a transaction during its merger review process when it identifies potential competitive concerns, or needs further clarification to assess whether a particular transaction could lessen competition or harm consumers.
This type of inquiry is known as a “Second Request” and is part of the Hart-Scott-Rodino (HSR) Antitrust Improvements Act.
Generally, the ASC space has not seen a ton of deal pushback from the FTC, largely because the industry is still very fragmented, with several thousand surgery centers, numerous operating companies and a robust ecosystem of independents.
But that’s likely to change.
As the ASC market continues to grow and consolidate, larger health systems and private equity firms are acquiring or merging ASCs at an increasing rate. These consolidations can raise concerns about reduced competition, higher prices for services and lower incentives to maintain quality.
What’s more, hospitals and health systems are increasingly integrating ASCs as part of broader networks that include outpatient services. This vertical integration can reduce competition by giving larger health systems control over various stages of care. The FTC might issue Second Requests to investigate whether these mergers or acquisitions are anti-competitive, especially when they result in significant market share control.
“Premerger review is a critical task for the antitrust agencies and to do it well, we need information about each deal’s potential antitrust risk,” Shaoul Sussman, associate director for litigation of the FTC’s Bureau of Competition, said in a statement regarding the recently released final rules. “This rulemaking is a much needed update to address changes in the marketplace that have undermined the agencies’ ability to detect and prevent illegal mergers, while at the same time creating a more efficient review process.”
Contextually, the new final rules mark the first major overhaul to HSR requirements in nearly 50 years.
In a brief posted on its website, experts from McDermott Will & Emery said the development “will fundamentally alter the pre-merger notification process.”
“While the Rules omit some of the more extreme aspects proposed in the 2023 draft rules, such as the need to provide draft documents and labor data, they impose substantially more burdens on filing parties than the current filing regime,” the brief explains. “The changes will have wide-ranging implications for all parties required to notify transactions under the HSR Act.”
