States are increasingly implementing laws that mandate hospitals and other healthcare providers to inform them about minor mergers or acquisitions, in support of federal antitrust enforcers investigating the healthcare industry. Federal Trade Commission officials and healthcare policy researchers argue that healthcare consolidation leads to higher medical costs and diminishes patient care quality. Despite successful challenges to hospital mergers in recent years, such transactions have persisted due to federal enforcers’ lack of awareness about them.
Wisconsin assistant attorney general for antitrust, Gwendolyn Cooley, emphasizes the importance of having enough resources to monitor these increasingly larger health systems, noting that the FTC cannot handle it alone. Between 2011 and 2021, approximately 1,000 hospital transactions were announced, with the US currently having just over 6,000 hospitals. To address consolidation concerns, California, Minnesota, Illinois, and Indiana have enacted laws requiring notification to state authorities prior to finalizing a merger or acquisition.
FTC officials and state attorneys general view the expanding state legislation as a means to fill gaps in federal antitrust enforcement within the healthcare sector. The increased focus on reviewing all hospital transactions represents a new and accelerating trend, primarily in states with Democratic attorneys general. While some healthcare entities argue that mergers and acquisitions improve access to care, regulators are increasingly vigilant in scrutinizing these transactions to ensure they benefit patients and maintain competition in the marketplace.
Recent developments in state legislation are exemplified by Minnesota’s utilization of a new law to oppose a proposed hospital merger. Under the law enacted in May 2023, healthcare entities must report proposed transactions to state officials for review to protect public interest. These efforts are also mirrored in Rhode Island, where a healthcare provider merger was blocked by the attorney general following an update to the state’s Hospital Conversions Act to include antitrust review.
Collaboration between federal and state authorities is crucial in addressing healthcare consolidation, given the limitations of the federal antitrust framework in detecting smaller acquisitions. State attorneys general provide valuable local knowledge and insights that can inform antitrust enforcement priorities, thereby complementing federal efforts to curb monopolistic practices in the healthcare sector.
The rise in state laws coincides with increased scrutiny on private equity’s role in healthcare consolidation, particularly concerning aggressive acquisitions by private equity firms. Regulators are closely monitoring these practices to prevent monopolization and safeguard patient access to quality and affordable healthcare. Private equity firms assert that their investments enhance healthcare services, while regulators and lawmakers aim to strike a balance between promoting competition and preserving patient care standards within the healthcare industry.