We continue to see affiliation activity among hospitals and health systems, albeit at a slower pace than previously experienced, likely due to the COVID-19 pandemic and the resulting slow down in elective care, staffing shortages and a disinclination of some patients to re-engage with their providers. These impacts, we believe, are transitory and will resolve themselves in due course leading to increases in deal volume. The deals we have seen are more “super-regional” in nature such as the Intermountain Healthcare/SCL Health transaction reaching across state lines in a significant way.
With that in mind, we think it instructive to visit certain of the critical legal and business issues arising out of the above-described arrangements.
One of the first issues we concentrate on in these transactions is antitrust enforcement. Hospital and health system mergers have long been a focus of federal and state antitrust enforcement agencies. The expressed concern with these deals is the creation of organizations with enough market power, whether it be in hospital services or physician services, to force third-party payers to pay higher than market prices that will be passed on to beneficiaries or to foreclose other providers from entering the relevant market.
In early 2021, the Biden Administration issued an Executive Order on antitrust enforcement, specifically identifying hospital mergers as a focus for future enforcement efforts. The Executive Order declares that “...
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