In a statement to Congress last week, Commissioner Rohit Chopra of the Federal Trade Commission (FTC) advocated for increased antitrust enforcement against private equity-backed “roll-up” acquisition strategies, especially acquisitions of physician practices and other healthcare providers. “Roll-ups” are a common strategy where an investor, such as a private equity firm, buys several companies operating in the same line of business and combines them into a larger organization that is better positioned to obtain a higher valuation due to economies of scale. Roll-up transactions are often valued under $94 million and thus are often not reportable under the HSR Act, a statute requiring the filing of pre-merger notifications to allow the FTC and Department of Justice (DOJ) to determine whether a transaction might violate the antitrust laws. Chopra claimed this lack of reporting allows private equity to “quietly increase market power and reduce competition” and urged the FTC to increase its focus on investigating non-reportable transactions.
Chopra expressed special concern about private equity involvement in the healthcare industry, specifically regarding acquisitions of specialist physician practices and providers of opioid treatment, hospice care, and air ambulance services. Said Chopra, “In addition to the risk of loss of competition, I am also troubled by other collateral consequences, such as the scourge of surprise medical billing by out-of-network physicians and ‘body brokering’ in the treatment of opioid dependency. The FTC must halt these acquisition strategies that result in higher costs and reduction in quality of care.” Chopra recommended the FTC do the following to combat anticompetitive roll-up transactions:
The Commissioner’s full statement is available here.