President Joe Biden in 2021 announced a set of new rules and guidelines for mergers and acquisitions, with pledges to implement by mid-2024.

Six months after taking office, Biden signed an executive order that created a White House Competition Council, designed to address antitrust concerns in a range of industries, including health care. These actions followed a steep rise in corporate consolidation and its potential impact on the prices of goods and services.

New rules and proposals include changes to pre-acquisition filing procedures required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as well as revised federal guidelines for regulatory approvals.

“Families are paying higher prices for necessities — things like prescription drugs, hearing aids and internet service,” the White House indicated in a statement. “And when there are only a few employers in town, workers have less opportunity to bargain for a higher wage and to demand dignity and respect in the workplace. In total, higher prices and lower wages caused by lack of competition are now estimated to cost the median American household $5,000 per year.”

Investigations ramp up

In the years since the administration took this position, scrutiny of M&A transactions has been on the rise, as have associated lawsuits and investigations by government agencies, including the U.S. Justice Department and the Federal Trade Commission.

Massive companies have come under fire or found themselves in court, including household names like Google (NASDAQ: GOOGL) and Amazon (NASDAQ: AMZN). Just this week, Google lost an antitrust suit brought by the software developer Epic Games. Two other antitrust suits against Google are still pending.

In September, the Federal Trade Commission and 17 state attorneys general sued Amazon alleging that the company uses anti-competitive strategies to gain an unfair advantage in the marketplace.

Amazon in a statement denied any wrongdoing and posited that the lawsuit would ultimately harm consumers.

Health care is among the industries that will likely be affected by the enhanced scrutiny of mergers and acquisitions, according to Michael Dashefsky, member at Bass, Berry & Sims and co-chair of the law firm’s Antitrust and Trade Practices Group.

“Agencies are ramping up enforcement. They are investigating things that in the past may not have always been investigated,” Dashefsky told Hospice News. “They’re investigating things more thoroughly. They’re requiring the merging parties, typically, to have to provide more information. They’re asking questions that maybe they typically haven’t always asked.”

Focus on larger operators, huge deals

While these changes will likely not affect transactions involving “mom-and-pop” agencies or the mid-size market, they could have an impact on proliferating “megadeals” that have occurred in the hospice and home health space.

The clearest examples of these types of transactions include the $5.5 billion acquisition of LHC Group by the UnitedHealth Group (NYSE: UHN) subsidiary Optum, or that same company’s pending transaction for the home health and hospice provider Amedisys (NASDAQ: AMED) for $3.3 billion.

One might also include Humana Inc.’s (NYSE: HUM) $8.1 billion acquisition of a 100% stake in Kindred at Home in 2021.

While these companies have not been implicated in any wrongdoing, transactions like these are coming under closer scrutiny.

“I’ve been practicing antitrust law for my entire career since 1996, and this is probably the most significant antitrust enforcement that we’ve seen in that period of time,” Dashefsky said. “There’s been a heavy focus on that in certain areas that has been outlined in various statements by the administration in terms of a focus within health care and other areas as well.”

This is already starting to play out for companies like Optum. While the government did not sue to block the Amedisys or LHC Group deals, they have been taking a closer look.

In August, Amedisys indicated in a U.S. Securities & Exchange Commission (SEC) filing that the Justice Department would be investigating its deal with Optum due to potential antitrust concerns.

The Justice Department previously launched a similar investigation of Optum’s $13 billion purchase of Change Healthcare. The law enforcement agency later sought to block the deal with a federal lawsuit, alleging that the deal would give UnitedHealth Group access to sensitive information about its competitors in the payer space. Ultimately, the courts sided with Optum.

The government to date has given no indication that it intends to block the Amedisys deal, but more of these types of investigations into similar transactions will likely go forward, Mike said. Regulators may also require some companies to divest a certain number of assets before they can close a deal.

Congress steps in

Congress is also asking questions. Sen. Elizabeth Warren (D-Massachusetts) and Rep. Pramila Jayapal (D-Washington) in October called on the Justice Department and the FTC to “scrutinize” the Optum-Amedisys transaction.

Warren and Jayapal voiced antitrust concerns in their letter to Jonathan Kanter, head of the Justice Department’s antitrust division and FTC Chair Lina Khan.

“The acquisition of Amedisys by UHG is one such transaction that the agencies should examine, though by no means the only one of its kind,” the senators wrote. “We therefore urge the agencies to closely scrutinize this and other similar acquisitions and block any activity found to be illegal under antitrust law.”

While the heightened oversight may not necessarily kill deals of that size, it could make them more challenging to complete. At the very least, buyers and sellers will face more questions and extensive requests for information regarding their businesses and their agreements.

“The policy of this administration has been to really significantly beef up and increase the amount of antitrust enforcement. If the proposed merger guidelines are, in fact, adopted and ratified, you would see the agencies following that approach even more closely,” Dashefsky said. “Some of that could potentially result in some deals not going through or companies may decide to not explore them as a result of the increase in enforcement.”