Antitrust & Competition Healthcare Year in Review 2023

2023 saw a significant uptick in antitrust scrutiny and enforcement, particularly in the healthcare space. After much rhetoric and a setback in challenging state Certificate of Public Advantage (COPA) laws, the Federal Trade Commission (FTC) brought its first challenge to a private equity “roll-up” scheme and successfully blocked two mergers late in 2023. However, neither of the FTC’s merger wins relied on new theories of harm advanced by the antitrust agencies in recent years. Rather, the FTC found success by asserting traditional antitrust claims that the combination of two direct competitors would reduce head-to-head competition and harm customers.

Building on these recent victories, there is little doubt that the antitrust agencies will continue to closely examine healthcare transactions. Although the FTC found recent success using its more traditional playbook, we expect the antitrust agencies will continue to probe more “novel” theories of harm, such as “serial” or “roll-up” acquisitions, the effects of mergers on labor, and transactions involving competitively sensitive data. Each topic was a key part of the antitrust agencies’ healthcare rhetoric in 2023, and we do not expect them to deviate from this path in 2024.

2023 Enforcement Roundup

FTC success in challenge to IQVIA-Propel acquisition
In late December, a federal judge agreed with the FTC that IQVIA’s acquisition of Propel Media would likely violate federal antitrust laws by combining two of the three top providers of programmatic advertising to healthcare professionals and issued an order preventing the transaction from closing.¹ Less than a week later, IQVIA called off the proposed acquisition. The FTC initially filed the action in July 2023 after a prolonged Second Request investigation.

The FTC alleged that Propel’s DeepIntent and IQVIA’s Lasso Marketing are two of the top three demand-side platforms (DSPs) that provide programmatic advertising—an automated form of targeted advertising to healthcare professionals—and that the planned acquisition would result in reduced competition.² In addition, the FTC raised concerns based on the role that IQVIA’s healthcare data business plays for other DSPs, alleging IQVIA would have the ability to disadvantage its competitors by restricting their access to such data.³

Judge Ramos of the Southern District of New York agreed with the FTC’s arguments that the merger would reduce competition for programmatic advertising to healthcare professionals. In the opinion, Judge Ramos adopted the FTC’s narrow characterization of the number of competitors in the market (being limited to three primary DSPs) and rejected the defendants’ argument that more general, non-healthcare-specific DSPs and social media platforms are viable competitors in providing programmatic advertising to healthcare professionals.⁴

Notably, Judge Ramos found that the transaction would presumptively have anticompetitive effects because the merged company would have a market share greater than 30%. In reaching this conclusion, Judge Ramos relied heavily on a US Supreme Court decision from the 1960s that made it relatively easy for the government to show mergers would harm competition based on market shares alone.⁵ Later Supreme Court decisions softened the decision relied upon by Judge Ramos, making it more difficult for the government to show that a merger would be anticompetitive by requiring courts to consider additional factors regarding market dynamics and not placing undue weight on market shares alone.⁶ These subsequent Supreme Court decisions cautioned courts to be careful in imposing an overwhelming burden on merging parties merely because an antitrust agency could present plausible market shares of a certain level. Since then, numerous federal courts have heeded this advice, reflecting a broader shift in antitrust policy that was less skeptical of mergers and more cognizant that market shares were a limited tool in identifying competitive harms.⁷ Judge Ramos’ reliance on 1960s-era case law bolsters the antitrust agencies’ attempts to reinvigorate merger review by convincing courts to return to a lower burden of proof. Indeed, the antitrust agencies cited favorably the same Supreme Court decision relied upon by Judge Ramos in the new merger guidelines published in December 2023 (2023 Merger Guidelines).

The FTC’s win in IQVIA/Propel was the first victory in court for either the FTC or Department of Justice (DOJ) in the healthcare space in 2023. We expect the antitrust agencies will cite to this case often in future merger challenges. If other federal district courts follow Judge Ramos’ lead in emphasizing older Supreme Court cases, antitrust agencies will likely find it easier to demonstrate harm to competition, while at the same time defendants will find it more difficult to show that actual market realties receive more judicial attention than market shares.

FTC challenge causes parties to abandon Tenet–John Muir transaction
John Muir Health abandoned its proposed acquisition of San Ramon Regional Medical Center, LLC from Tenet Healthcare Corporation less than a month after the FTC challenged the deal.⁸ The FTC alleged that the addition of San Ramon Regional Medical Center to John Muir Health’s two inpatient hospitals would reduce competition for general acute care (GAC) services in parts of California’s Contra Costa and Alameda counties⁹ and would also give John Muir Health more than 50% market share of GAC services in this area and, by extension, leverage in negotiations with insurers, leading to higher prices.

Here again, the FTC did not assert more “novel” theories of harm, relying instead on its traditional playbook and arguments that it frequently uses to challenge hospital mergers. Indeed, the FTC alleged that the transaction was presumptively unlawful under the thresholds of the prior merger guidelines and did not invoke the less lenient standards advocated in the 2023 Merger Guidelines.¹⁰ This challenge demonstrates the unsurprising reality that, despite a focus on advancing antitrust law by exploring nontraditional theories of harm, the FTC will continue to bring enforcement actions under standard theories of harm to competition resulting from mergers of direct competitors resulting in high market concentration.

Federal court rejects FTC challenge to Louisiana COPA laws
The more recent victories discussed above come on the heels of a major setback in the FTC’s campaign against COPA laws. In September 2023, a federal judge rejected the FTC’s arguments that federal antitrust laws supersede state COPA laws.¹¹ As covered in prior updates, the FTC has long campaigned against state-level COPA laws, which are laws passed by state governments to shield hospital mergers and other collaborations from federal antitrust review. State governments pass COPA laws with the goal of immunizing hospital transactions where the state believes the benefits of the deal outweigh any anticompetitive concerns. The FTC has vigorously opposed these laws, arguing that they reduce federal antitrust regulators’ ability to evaluate or challenge transactions they deem anticompetitive and are an impediment to the FTC’s enforcement priorities.

In April 2023, the FTC challenged the acquisition of three hospitals in Louisiana, alleging the merging parties failed to abide by federal antitrust laws and submit proper HSR notifications. The merging parties and the Louisiana attorney general argued that the acquisition was exempted from federal laws through Louisiana’s COPA statute, and hence HSR filings were not required. A federal judge sided with the merging parties and state attorney general, who filed motions for summary judgment, and affirmed that the transaction was exempt from federal review under COPA.¹²

It is too early to determine whether this setback will dampen the FTC’s future efforts against state-level COPA laws. However, this defeat is a clear sign that courts may not be receptive to the FTC’s arguments that COPA laws should not take precedence over federal antitrust laws.

Future Developments

Agencies likely to continue focusing on roll-up schemes
In September 2023, the FTC sued private equity firm Welsh Carson based on an alleged “roll-up scheme” in the healthcare space. This represented a shot across the bow to the private equity and healthcare industries. These “roll-ups” or “serial acquisitions” have been a focus of FTC rhetoric and may be the first of several actions based on this more novel theory of harm. As detailed in our prior alert, the FTC’s federal district court complaint alleged that Welsh Carson and portfolio company U.S. Anesthesia Partners, Inc. (USAP) engaged in a “multi-year anticompetitive scheme to consolidate anesthesiology practices in Texas, drive up the price of anesthesia services provided to Texas patients, and boost their own profits.”¹³ The FTC alleges that USAP amassed market shares as high as ~70% by revenue and ~60% by cases for hospital-only anesthesia services through a series of smaller acquisitions.

Welsh Carson and USAP have filed motions to dismiss that challenge the FTC’s suit on a number of grounds, including by arguing that the FTC improperly excluded ambulatory anesthesia services from its analysis and failed to show that either defendant violated the law. In a broader challenge, the defendants argued the FTC’s statutory and constitutional authority to bring this challenge in the first place.¹⁴ Welsh Carson also attacked the FTC’s assertion that it can be found liable for any of USAP’s actions, since its role was limited to providing financing and it never acted as a market participant.¹⁵ Since USAP’s inception, Welsh Carson has never held more than 23% share in USAP nor more than two of fourteen board seats, and it therefore argued that non-controlling investors cannot be found liable for their investments’ actions.¹⁶

The outcome of this action will be a bellwether for the willingness of courts to accept regulators’ more aggressive attitude toward private equity firms’ practice of acquiring multiple companies in the same space. And the stakes remain high for the parties because private litigants have adopted the FTC’s arguments and brought class action claims as well.¹⁷ A successful action by either the FTC or private litigants may invite similar claims in other services or geographic markets. As a result, healthcare industry participants should carefully consider the antitrust risk profile of acquisitions involving multiple practices or companies in the same segment and geography.

Agencies likely to initiate investigations and bring new challenges based on both traditional and novel theories of harm
Hoping to extend its winning streak, in January 2024, the FTC sued to block Novant Health, Inc.’s acquisition of two North Carolina hospitals from Community Health Systems for $320 million. The FTC alleged that the acquisition would give Novant a 65% market share in inpatient GAC services in the East Norman Lake area of North Carolina, leading to less choice, higher prices, and worse outcomes for patients.¹⁹ Notably, in its complaint, the FTC relied on its traditional playbook of alleging that the transaction would reduce competition for general acute care services and did not turn to any more novel theories of harm, following its approach in the John Muir / Tenet challenge. However, the FTC did apply the HHI thresholds (a commonly used measure of market concentration in merger review) enumerated in the 2023 Merger Guidelines in its complaint, which is the first such healthcare challenge to reference the new HHI thresholds. The FTC also hedged its bets by arguing in the alternative that the parties’ alleged HHI of 3300 would have all surpassed the previous thresholds under the prior guidelines.

This matter underscores the fact that the 2023 Merger Guidelines may not necessarily lead the agencies to make different enforcement decisions at present, although a favorable citation to the revised thresholds under the Final Guidelines by the North Carolina District Court judge could potentially lead to challenges at lower levels of concentration, similar to Judge Ramos’ decision in the IQVIA opinion. Responding to the FTC’s allegations, Novant stated that it “will pursue available legal responses to the FTC’s flawed position.”²⁰

It remains unclear whether Novant will follow Tenet’s lead in abandoning a challenged transaction or seek to litigate.

^[1] FTC, Statement on FTC Win Securing Temporary Block of IQVIA’s Acquisition of Propel Media (Jan. 3, 2024).
^[2] FTC, FTC Sues to Block IQVIA’s Acquisition of Propel Media to Prevent Increased Concentration in Health Care Programmatic Advertising (July 17, 2023).
^[3] The court did not ultimately decide whether the merger would allow IQVIA to harm competition by restricting data, having ruled in the FTC’s favor on its other claims.
^[4] FTC v. IQVIA Holdings Inc. and Propel Media, Inc., No. 23 Civ. 06188 (S.D.N.Y. Jan. 8, 2024).
^[5] United States v. Philadelphia Nat’l Bank, 374 U.S. 321 (1963).
^[6] United States v. General Dynamics Corp., 415 U.S. 486 (1974) (affirming district court determination that a merger with market shares >30% would not substantially lessen competition because of “other pertinent factors” in market); United States v. Marine Bancorporation, 418 U.S. 602, 631 (1974) (after government established prima facie case, “the burden was then upon appellees to show that the concentration ratios, which can be unreliable indicators of actual market behavior, did not accurately depict the economic characteristics of the [relevant] market”); United States v. Baker Hughes, Inc., 908 F.2d 981, 991 (D.C. Cir. 1990) (“Without overruling Philadelphia Bank, then, the Supreme Court [in General Dynamics and Marine Bancorporation] has at the very least lightened the evidentiary burden on a section 7 defendant.”).
^[7]See, e.g., Winn-Dixie Stores, Inc. v. E. Mushroom Mktg. Coop., Inc., 89 F.4th 430, 444 (3d Cir. 2023) (finding that a 90% market share does not compel a finding of market power since “market share alone is insufficient to establish market power.”) (internal cites omitted); Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1206 (9th Cir. 1997) (“Courts generally require a 65% market share to establish a prima facie case of market power.”); PSI Repair Servs., Inc. v. Honeywell, Inc., 104 F.3d 811, 818 (6th Cir. 1997) (“A thirty-percent share of the market, standing alone, provides an insufficient basis from which to infer market power.”).
^[8] FTC, Statement Regarding the Termination of John Muir’s Takeover of San Ramon Regional Medical Center from Tenet Healthcare (Dec. 18, 2023).
^[9] Administrative Complaint, John Muir Health and Tenet Healthcare Co., FTC Docket No. 9421 (Nov. 17, 2023).
^[10] The FTC brought this action one month before the 2023 Merger Guidelines became final. The FTC’s challenge to Novant Health’s acquisition of two hospitals in North Carolina, discussed below, will be illustrative in how the FTC applies its new guidelines in a hospital merger context.
^[11] Federal Trade Commission v. HCA et al., 2:23-cv-0105, Order & Reasons (Sept. 27, 2023).
^[12]Id.
^[13] FTC, “FTC Challenges Private Equity Firm’s Scheme to Suppress Competition in Anesthesiology Practices Across Texas,” (Sept. 21, 2023).
^[14] FTC v. U.S. Anesthesia Partners Inc., et. al., Welsh Carson Entities’ Motion to Dismiss, 4:23-cv-03560 (S.D. Tex Nov. 20, 2023).
^[15] Id. at 21.
^[16] Id. at 2.
^[17] Electrical Medical Trust and Plumbers Local Union No. 68 Welfare Fund—self-funded employee health benefit plans—filed suit with substantially similar claims as the FTC, requesting the court grant injunctive and monetary relief.
^[18] FTC, “FTC Sues to Block Novant Health’s Acquisition of Two Hospitals from Community Health Systems” (Jan. 25, 2024).
^[19] Id.
^[20] Fierce Healthcare, “FTC opposes Novant Health's $320M hospital deal with Community Health Systems” (Jan. 25, 2024).

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