As we approach the end of 2023, this article recaps the following stories that healthcare providers should remember as they consider the antitrust enforcement environment that they are likely to face in 2024. Holland & Knight's Antitrust Team welcomes the opportunity to discuss any of these issues and the impact they might have on your businesses in 2024.

Key Decisions and Themes from 2023

Non-Compete, Non-Solicitation and No-Poach Agreements

The year kicked off with a Jan. 5 announcement from the Federal Trade Commission (FTC) proposing a new rule that would ban employers from imposing non-competes on their workers, with limited exceptions. The proposed rule is based on the FTC's finding that non-competes constitute an unfair method of competition in violation of Section 5 of the FTC Act. For healthcare entities, this could have a chilling effect on the healthcare industry. Researchers estimate that at least 40 percent of physicians are held to restrictive covenants that typically prevent them from working for competitors within a 30-mile radius for one or two years. These contracts are even more widely used and strictly enforced in the insurance and pharmacy benefit manager industries. Absent a federal policy, non-compete agreements have been governed by a patchwork of state laws.

Additionally, the inability of the U.S. Department of Justice (DOJ) to persuade juries to convict employers for allegedly entering into naked no-poach or wage-fixing agreements continued in 2023. In March, a jury in Maine acquitted four business managers of home health agencies of charges that they entered into such agreements. Despite its inability to secure convictions, the DOJ has succeeded in establishing naked no-poach and wage-fixing agreements as per se violations of Section 1 of the Sherman Act and proper subjects of criminal prosecutions. The DOJ remains determined to continue prosecuting naked no-poach agreements that harm workers. Companies should continue to fully evaluate antitrust risks and not let their guards down despite DOJ losses.

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State "Baby HSR" Statutes

In a growing trend, states are enacting laws modeled after the federal Hart-Scott-Rodino (HSR) Act, which requires parties to proposed transactions that satisfy certain reporting thresholds to first provide notice and information to the FTC and DOJ. Known as "mini HSRs" or "Baby HSRs," these state laws establish similar notification requirements but are designed to cover transactions that are below the federal reporting threshold. Many Baby HSRs specifically target certain industries, particularly healthcare. Baby HSRs or other pre-transaction notification requirements as applicable to the healthcare industry are recognized in several states, including California, Colorado, Connecticut, Hawaii, Illinois, Massachusetts, Minnesota, Nevada, New York, Oregon, Rhode Island, Vermont and Washington.

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HSR Updates

The FTC is required under the Clayton Act to revise the HSR thresholds annually based on changes in the gross national product. A new six-tiered HSR filing fee structure, including significant fee increases particularly for certain large transactions with fees now ranging from $30,000 to $2.25 million, took effect on Feb. 27, 2023, replacing the previous three-tiered structure that had been in place since its adoption in 2000. In addition, the Consolidated Appropriations Act, 2023 requires that the FTC increase filing fees annually based on the percentage increase in the consumer price index (CPI) as determined by the U.S. Department of Labor if such increase is greater than 1 percent for the prior year as compared to the CPI for the fiscal year ended Sept. 30, 2022.

The FTC also announced its intention to increase the cost and burden of the HSR process, which might prevent many even benign and procompetitive mergers and acquisitions (M&A) from getting out of corporate boardrooms. The FTC's explanation for the need for the imposition of additional HSR disclosure burdens is generally consistent with its recently expressed views that existing approaches to merger review have been too permissive and not up to the task of preventing mergers that harm consumers. Companies involved in M&A activities already face cumbersome and costly regulatory demands before they can consummate their transactions, but those requirements will become significantly more challenging if the regulatory changes proposed are ultimately adopted.

Finally, the U.S. District Court for the Eastern District of Louisiana recently issued a summary judgment against the FTC on its challenge to the acquisition of three Louisiana hospitals pursuant to the Louisiana Certificate of Public Advantage (COPA) statute, finding that the transaction was exempt from federal antitrust laws, including the HSR Act. The court rejected the FTC's position that, even if the COPA prevented a substantive challenge to the transaction under the Clayton and Sherman Acts, the parties still had to comply with the HSR Act's procedural requirements. The decision brings much-needed clarity to the protections provided to merging hospitals subject to a COPA.

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Private Equity Roll-Ups and Enforcement

Antitrust enforcers from the FTC and the Antitrust Division of the DOJ have indicated that their principal areas of concern are so-called "roll-up" strategies, whether firms' focus on cost cutting and short-term returns disqualifies them as divestiture purchasers, and "interlocking directorates" that can violate the Clayton Act and allow inappropriate sharing of competitively sensitive information. Where antitrust review in the past might have been regarded as merely an inconvenient possibility, firms should consider from the outset of any exploration of a potential acquisition that antitrust review (and its associated delays and risks) could be likely and bring in experienced antitrust attorneys at a transaction's earliest stages to evaluate potential risks.

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Withdrawn Healthcare Guidelines

The DOJ's Antitrust Division on Feb. 2, 2023, announced its withdrawal of antitrust policy statements applicable to healthcare markets, expressing a preference for a "case-by-case" enforcement approach over advance guidance for industry participants. The FTC likewise withdrew the policy statements in July 2023. Withdrawal of the policy statements creates uncertainty for entities outside of the healthcare industry that had relied on established antitrust "safety zones" when conducting industry benchmarking surveys and engaging in certain types of transactions.

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Revised Merger Guidelines

In July 2023, the FTC and DOJ jointly announced the release of proposed Merger Guidelines that would expand significantly the number and types of transactions subject to antitrust challenge. The Guidelines advance the view of the FTC and DOJ that prevailing approaches to merger review have been too permissive and not up to the task of identifying and preventing transactions that harm consumers and workers. The detailed explanations in the revised Guidelines will help companies that have encountered a more hostile enforcement environment understand in advance the nature of the concerns that the DOJ and FTC might raise about contemplated transactions.

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Antitrust Considerations for Healthcare Joint Ventures

Increased government scrutiny of combinations in the healthcare industry, including challenges from the FTC, means some providers are pursuing joint ventures as a way to achieve procompetitive benefits of traditional mergers while managing antitrust risks. Companies should keep several factors in mind when pursing joint ventures through which resources and experience may be combined or shared, whether through service-line expansion or other combinations.

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2024 Outlook

This has been an active year for healthcare antitrust enforcement, and more of the same is expected in 2024. Industry observers expect the revised HSR rules and state "Baby HSRs" to force companies to notify federal and state antitrust enforcers of more transactions and to provide enforcers with broader and more burdensome disclosures. That may lead to more investigations that take longer to resolve and are more likely to result in litigation. Additionally, assuming the draft Merger Guidelines are adopted in their current form or something close to it, companies can expect that federal and state enforcers will use them aggressively to challenge more transactions using new theories of harm. Although the Merger Guidelines do not change the law and are not binding on courts, they are instructive to show how antitrust enforcers evaluate and investigate mergers. By all accounts, the current enforcement environment will continue into 2024 and will focus heavily on the healthcare industry, along with private equity transactions or "roll-ups." Companies in those industries should expect heightened scrutiny leading to more antitrust investigations and litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.