How 3 FTC moves could hurt hospitals, health systems

The Federal Trade Commission recently withdrew two antitrust policy statements related to enforcement in healthcare markets and proposed changes to premerger notifications and noncompete agreements, which could all have a significant effect on hospitals and health systems. 

1. Premerger notification

The FTC proposed changes to the premerger notification form in addition to premerger notification rules implementing the Hart-Scott-Rodino Act, which requires organizations to report large transactions to the FTC and Justice Department for antitrust review.

The agency argues that the proposed changes would help it to more effectively screen transactions for potential competition issues within the waiting period, which is generally 30 days. The FTC said this competition review is important to identify deals that require in-depth investigations to determine whether they would violate antitrust laws and, if so, to seek to block the proposed transaction.

The proposed changes for mergers and acquisitions would impose a significant burden on filing parties, "yet are largely unnecessary to screen transactions for closer review," the American Hospital Association wrote in a Sept. 5 letter to FTC Chair Lina Khan. "The amended rules would require filing parties to submit more information than the agencies could feasibly review in 30 days."  

Click here for more details on the proposed changes.

2. Antitrust policy

The FTC has withdrawn two antitrust policy statements related to enforcement in healthcare markets.

Policy statements are non-binding and do not set legal obligations. Instead, they are issued to explain how the agency applies competition and consumer protection laws in various areas. The agency believes that the two statements are outdated and no longer reflect market realities and withdrawing them will help promote fair competition in healthcare markets.

Given the significant changes in healthcare markets over the last 30 years, the statements no longer serve their intended purpose of providing accurate guidance to market participants, according to the FTC. The commission said it will continue its enforcement by evaluating mergers and conduct on a case-by-case basis in healthcare markets that affect consumers.

"AHA is deeply disappointed that the FTC made the same mistake as the DOJ in withdrawing antitrust guidelines for hospitals and other health care providers," Melinda Hatton, general counsel and secretary, said. "Over the years, AHA has urged both federal antitrust agencies to modernize the guidelines to accommodate the need for more flexibility in enforcement actions to support hospitals' ability to navigate a changing healthcare landscape. And, AHA was instrumental in securing appropriate [accountable care organization] guidance that allowed hospitals to fully participate in that important program. Withdrawing all the guidance without consultation with the field is both unnecessary and reckless."

Click here for more details on the antitrust policy statements.

3. Noncompete agreements

The FTC proposed a rule that could lift wages by nearly $300 billion per year economywide by blocking companies from limiting their workers' ability to work for a competitor.

The rule would ban noncompetes, which prevent employees from leaving for a rival or starting a competing business for a certain amount of time after their employment ends. They are often applied to physicians but appear to suppress pay or otherwise directly affect between about 20 percent to 45 percent of workers in the private sector, according to The Wall Street Journal.

"Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand," Ms. Khan said. "By ending this practice, the FTC's proposed rule would promote greater dynamism, innovation and healthy competition."

The AHA has urged the FTC to withdraw the proposed rule to ban noncompetes, arguing that it would hurt the healthcare industry by invalidating millions of dollars of existing physician and senior hospital executive contracts and exacerbate workforce challenges — particularly in rural communities.

The association pointed to ongoing staffing shortages that are projected to affect hospitals and health systems far beyond the pandemic and said that the proposed ban errs by seeking to create a "one-size-fits-all rule." for all employees across all industries. At the very least, any noncompete rule should exempt physicians and senior executives or — more generally — highly skilled, highly paid employees using categories that are well-established under federal law, according to the AHA.

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