On June 6, 2024, California Legal professional Basic Rob Bonta introduced that he led a multistate coalition of 11 (11) state attorneys basic in in submitting a remark letter (the “Remark Letter”) in response to the Federal Commerce Fee, the U.S. Division of Justice, and the U.S. Division of Well being and Human Companies’ (collectively the “Businesses”) request for data relating to consolidation in healthcare by non-public fairness. On March 5, 2024, the Businesses issued a “Request for Data on Consolidation in Healthcare Markets,” on the identical day the Businesses hosted a public workshop relating to the impression of personal fairness funding within the healthcare system.
The California-led, 30-page Remark Letter “presents the angle of the Attorneys Basic of the States on the antagonistic results ensuing from consolidation in healthcare markets, notably by way of transactions pushed by non-public fairness funds or different various asset managers.” Particularly, the Remark Letter identifies a number of state issues relating to non-public fairness’s function in healthcare, together with consolidation and vertical integration.
The Remark Letter additionally alleges that the construction of personal fairness companies (i.e., funds which are managed by a basic companion and that maintain investments in portfolio corporations) are a enterprise mannequin with incentives which will hurt customers, as a result of, amongst different issues, the non-public fairness companies “Load acquired corporations with excessive debt burdens and costs,” and “The short-term nature of personal fairness funds forces a concentrate on short-term achieve.”
With respect to healthcare, the Remark Letter particulars the states’ issues relating to non-public fairness’s impression on sure sectors, together with nursing houses and hospitals and advances a number of suggestions for elevated authorities motion, together with elevated transparency, banning sure contractual provisions (e.g., anti-steering) in federal contracting, and extra state-federal coordination in investigating and difficult mergers and acquisitions.
The Remark Letter serves as a reminder that antitrust scrutiny of personal fairness in healthcare is just not restricted to the federal antitrust enforcement businesses, as a number of states (California specifically) proceed to concentrate on the business. Non-public fairness companies and portfolio corporations and their transaction companions ought to proceed to be conscious of this scrutiny as they contemplate their funding and transaction methods.
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