Hospital transactions, including acquisitions and mergers, that meet Hart-Scott-Rodino (HSR) thresholds must, subject to any available exception, be reported to the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ). Additionally, parties to such a transaction must observe a mandatory 30-day waiting period before completing the transaction. The waiting period affords the federal antitrust agencies the opportunity to determine, before the transaction is completed, whether the transaction raises any significant competitive concerns.
The majority of reported transactions, including hospital transactions, do not raise significant competitive concerns, and are allowed to close after expiration of the initial waiting period. A small percentage of reported transactions, however, are “cleared” to either the FTC or DOJ for further investigation. If the reviewing agency needs additional information to assess the competitive impact of the transaction, it may issue a “second request” for information. Compliance with a second request generally entails, among other things, extensive production of documents, submission of written information, and witness depositions. Parties that have gone through the second request process know well how time consuming and expensive it is. Furthermore, the issuance of a second request has the effect of resetting the waiting period to 30 days after the parties have substantially complied with the second request.
Unfortunately, hospital transactions reported pursuant to HSR have seen a staggering increase in second requests. According to the agencies’ HSR Annual Report for Fiscal Year 2019 (covering the period from October 1, 2018–September 30, 2019), only 20% (a relatively high percentage compared to other industry groups) of hospital transactions cleared to one of the federal agencies for further review received a second request. However, according to the most recent annual report (HSR Annual Report for Fiscal Year 2020 covering October 1, 2019–September 30, 2020) released jointly by the federal agencies earlier this month, the percentage of hospital transactions cleared to one of the federal agencies for further review (all of which were cleared to the FTC) which were then subjected to a second request jumped to almost 55%.