While planned mergers, acquisitions, and joint operating agreements will likely continue to increase, Moody’s cautioned that scrutiny from federal and state regulators has become a costly risk for even cross-market deals.
“On the regulatory front, not-for-profit cross-market mergers have generally not led to the same degree of scrutiny as combinations in a single market,” the report notes. “That scrutiny is intensifying as federal and state regulators increasingly have antitrust concerns and seek to control healthcare costs.”
The federal government is challenging more healthcare deals than in the past, and some have folded under the pressure. States are also reviewing healthcare consolidation and its impact on competition, quality and costs. Both Indiana and California state legislatures are working to expand review authority over hospital transactions, and Washington could follow suit.
“Heightened concerns among regulators about consolidation carries particular risks for distressed systems seeking exit strategies because it could make it harder to find a buyer,” the report notes. “If the number of merger denials increases, larger systems active in M&A may also need to reassess their growth strategies.”
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