Providers are calling President Joe Biden’s executive order to ratchet up scrutiny of hospital mergers and noncompete clauses as misplaced and adding bureaucratic red tape to merger agreements.
Biden’s order, released Friday, calls on the Federal Trade Commission (FTC) and the Department of Justice to review hospital mergers to ensure they do not harm quality and raise prices. The order is the latest scrutiny from the federal government over mergers and acquisitions in the industry.
Hospital groups said the order could add more bureaucratic red tape to mergers that are already scrutinized.
“It is important to stress that hospital mergers and acquisitions undergo an enormous amount of rigorous scrutiny from the federal antitrust agencies and state attorneys general,” said Rick Pollack, president and CEO of the American Hospital Association (AHA), in a statement Friday.
AHA also noted that mergers with larger systems can help rural communities as it gives such providers “scale and resources needed to improve quality and decrease costs.”
In addition, “miring hospitals in legal and bureaucratic red tape will simply slow critical care to the bedside,” said Federation of American Hospitals President and CEO Chip Kahn. “The administration should recognize that the tragic COVID-19 pandemic has at least provided a natural experiment that demonstrates that hospital integration and scale can serve patients and communities during times of dire need.”
Biden’s order said that mergers have left many areas, including rural communities, without convenient access to care.
Since 2010, there have been 120 rural facilities that have had to shut down, according to a 2020 report from the Chartis Center for Rural Health.
It remains unclear the role that mergers and acquisitions have had on rural hospital closures. A study from the Medicare Payment Advisory Commission found that the decline in inpatient admissions in 40 hospitals that shuttered was due to patients shifting care to other hospitals.
The order is the latest scrutiny from the federal government on hospital mergers.
A proposed deal for Methodist Le Bonheur to buy two hospitals from Tenet in the Memphis, Tennessee area was called off late last year after the FTC sued to stop it, arguing the proposal could reduce competition and raise prices in the area.
Another area that could cause fierce opposition is noncompete clauses, experts say.
Biden called for the FTC to issue regulations that target “non-compete clauses and other clauses or agreements that may unfairly limit worker mobility,” the order said.
But experts say noncompete clauses have a place in the industry.
“Without effective non-competes, healthcare systems and healthcare investors may be reluctant to invest in healthcare enterprises that have opportunities to expand healthcare services,” said Brent Hill, a partner at healthcare law firm Waller, in a statement to Fierce Healthcare.
Many states also already provide noncompete restrictions that “must be reasonable in time and geographical scope,” added Waller Partner Eric Scalzo.
Providers have cautioned the FTC from attacking all noncompete clauses before. The American Medical Association wrote to the FTC in February 2020 saying the agency does not clamp down on the agreements for physicians.
Due to the diversity in how states handle noncompetes, a blanket approach in a rule or guidance could have “limited usefulness,” the association said.