FTC targeting healthcare private equity deals: What ASCs need to know

The Federal Trade Commission has taken aim against a private-equity firms' healthcare deal in a move regulators say could spell trouble for other healthcare agreements the agency deems anticompetitive,  The Wall Street Journal reported recently.

On June 13, the FTC and Justice Department ordered healthcare investor JAB Consumer Partners to divest veterinary clinics in California and Texas after a planned $1.1 billion takeover of SAGE Veterinary Partners by the JAB-backed National Veterinary Associates. The order also required the firm to get FTC approval for future acquisitions. 

The FTC's order went beyond the veterinarian sector and took aim more broadly at private equity's investment in healthcare, which could mean trouble for the ASC industry as private equity interest increases.  

Mergers by private equity firms can let them “accrue market power and reduce incentives to compete, potentially leading to increased prices and degraded quality” of services and potentially producing “appalling patient outcomes,” FTC chair Lina Khan wrote in a statement about the JAB action. 

Private equity firms have invested $22.7 billion in the U.S. healthcare sector through May, according to researcher PitchBook Data. 

Private equity's potential to affect clinical care has also raised concerns. 

"Private equity investment is a double-edged sword," Craig Gold, administrator of Virginia Center for Eye Surgery in Virginia Beach, told Becker's. "On one side, it can provide much-needed capital investment and financial stability into an ASC; on the other, it can create a profit-hungry bureaucracy, which can detract from the clinical autonomy which comes from a traditional physician-owner model." 

In June, Andrew Forman, deputy assistant U.S. attorney general in the antitrust division, told American Bar Association conference attendees that his agency is keeping an eye on the effects of private equity healthcare investments and whether they reduce competition, the Journal reported. 

Private equity has increasingly looked to specialties such as gastroenterology, orthopedics and ophthalmology as areas for growth. ASCs, too, have been a focus for private equity companies. Raleigh, N.C.-based Compass Surgical Partners recently snagged a private equity investment to support its expansion into new markets, according to an April report from Avalere.

The JAB order is the first public action against a private equity firm under new antitrust authorities, according to the Journal, and attorneys who work with firms on antitrust matters have said the FTC has begun asking private equity firms far more questions.

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