On January 15, 2025, the U.S. Department of Health and Human Services (HHS) released a long-anticipated report on the impact of consolidation in health care markets. The report, which HHS prepared in consultation with the U.S. Department of Justice and the U.S. Federal Trade Commission (collectively, the Agencies), is based on findings from the Agencies' March 2024 Request for Information (RFI) and raises significant concerns over consolidation in the healthcare market. Citing various studies, the report states that recent healthcare mergers and consolidation across the industry have increased prices, reduced patient access, and negatively impacted the quality of care, and cites the recent influx of private equity (PE) investment in the healthcare sector as a major contributor to these harms. The report notes it is clear from the commenters' responses that the Agencies' past actions have not been sufficient to address the harms consolidation creates and that the Agencies should more actively enforce antitrust and other relevant laws and carefully scrutinize potentially harmful transactions.
Background: Tri-Agency Collaboration on Healthcare Competition
The report is part of a collaboration between the Agencies that arose from a December 2023 White House directive aimed at promoting competition in healthcare markets. This tri-agency collaboration is one of several initiatives undertaken by the Biden administration to address competition concerns in the healthcare industry, including the creation of a separate task force to target healthcare monopolies and collusion announced last May.
The Agencies received more than 2,000 unique comments in response to the RFI from stakeholders including patients, healthcare providers, insurers, labor organizations, and academic researchers. The report synthesizes the Agencies' findings from the comments and various studies and identifies trends, challenges, and opportunities to address rising costs, reduced competition, and quality of care concerns in increasingly consolidated healthcare markets.
Key Findings: Private Equity in the Crosshairs
The report highlights several significant trends related to consolidation and PE investment in healthcare markets that it links to concerns over competition, pricing, and quality of care. Below are the key findings from the report.
Consolidation Increases Prices and Reduces Access
The report underscores how increased consolidation across healthcare markets has led to higher prices for patients and insurers. In addition to higher costs, the report identifies reduced access to care and quality concerns, especially in rural communities where hospital acquisitions have led to service reductions or closures.
Private Equity Investment Results in Quality Reductions
Private equity's expanding role in healthcare emerged as a key focus of the report. Over 40% of the comments mentioned PE, and 95% of the comments in which an opinion about PE was expressed were negative. The report highlights concerns that PE-driven strategies, including roll-up acquisitions and cost-cutting measures, can reduce clinical autonomy, lower the quality of care, and prioritize short-term financial gains over long-term patient outcomes.
Mixed Experiences Among Physicians Working with PE Firms
The report highlights mixed reviews from physicians involved in PE-backed transactions, particularly those involving the sale of independent practices. While some physician-owners cited positive outcomes, such as access to resources and operational support, others reported feeling misled by opaque agreements and financial pressures. Examples include disputes about pay formulas, reduced compensation, and restrictive contractual arrangements that disproportionately affected junior partners.
Calls for Greater Transparency in PE-Led Transactions
Transparency emerged as a recurring concern in the report, with stakeholders—including patients, providers, and researchers—expressing frustration over the lack of visibility into PE ownership and transaction details. Commenters called for clearer disclosures about healthcare organizations' ownership structures and the financial practices underlying acquisitions.
Dissatisfaction with Vertically Integrated Private Health Insurers
The report echoed widespread dissatisfaction with private health insurers, particularly large, vertically integrated payer-provider health insurance companies. The scale and market power of vertically integrated insurers were seen as creating fragility in the healthcare system, with many commenters mentioning the Change Healthcare cyberattack.
Takeaways: Expect Regulators to Continue to Closely Scrutinize Healthcare Transactions
The report's findings reflect the current administration's skepticism toward mergers and acquisitions, and PE-backed investment in particular, in the healthcare sector. While we generally expect a more deal-conducive environment for PE in 2025 under the new administration (as we recently detailed in our 2025 Healthcare Private Equity Outlook & Trends publication), the report nonetheless emphasizes the growing concern among regulators and stakeholders that PE investments can pose significant risks to patients and the healthcare market.
The report also outlines several future policy considerations—many of which are likely to take effect this year despite the transition to a new administration. Among other policies, the report notes the need for increased ownership transparency and increased disclosures for healthcare transactions—both of which are part of the substantial changes to the Hart-Scott-Rodino (HSR) premerger notification form set to take effect on February 10, 2025. Stakeholders therefore should remain vigilant in assessing antitrust risk and ensuring regulatory compliance when contemplating transactions.
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