Monaco’s speech focused on compliance issues in non-healthcare transactions, but it has garnered attention from healthcare companies and their advisors. While we await written guidance on the policy, perhaps the biggest takeaway from Monaco’s speech was the signaling of DOJ’s future enforcement efforts to companies who do not adequately invest in compliance, whether in legal diligence or otherwise: “Invest in compliance now or your company may pay the price – a significant price – later.” In fact, following DOJ’s announcement, on November 6, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (HHS) released new General Compliance Program Guidance, which is the most up-to-date, comprehensive and practical general compliance guidance in decades.
The practical implications of the DOJ’s announcement to healthcare M&A transactions include the following:
• Buyer Due Diligence. For buyers, this means not only performing thorough legal due diligence (particularly around compliance) but also budgeting for and accelerating operational integration in order to identify and remediate potential issues that may not have surfaced during diligence. • Buyer Indemnification. For buyers, ensuring clear and adequate indemnification protections for conduct that may have begun pre-closing and continued post-closing, but in some cases, may not have been identified until post-closing. • Seller Disclosures. For sellers, ensuring the right to actively participate in any post-closing disclosures by buyers. • Seller Cut-Off Period. For sellers, ensuring an appropriate cut-off period for exposure for any post-closing conduct. 9. Proposed Changes to Antitrust Review of Mergers Raise Significant Issues for PE Deals in Healthcare BY MICHAEL DASHEFSKY, LUKE SMITH & PATRICK ZINCK The FTC and DOJ (“the Antitrust Agencies” or “the Agencies”) have outlined two sets of major changes relating to antitrust review of mergers that may significantly increase the burden and antitrust risk associated with healthcare transactions beginning in 2024.
Change One: New and More Stringent Merger Guidelines
The Antitrust Agencies recently finalized their new Merger Guidelines, which replace the Agencies’ previous Guidelines establishing the framework used to evaluate the competitive effects of potential transactions. The new Merger Guidelines greatly expand the types of mergers that are deemed harmful to competition. Some of the changes that are likely to have the greatest impact on PE include: • Market Share. Any deal creating a company with a market share of 30% or more will be viewed as presumptively anticompetitive, even if one of the parties to the transaction contributes as little as 1-2% of the share. This change will significantly increase the antitrust risks of transactions in markets where a healthcare provider is already present. • Scrutiny of Total Impact. The Agencies will now consider the total impact of a series of prior acquisitions when examining a merger, whereas previously, the Agencies evaluated only the deal before them. Roll-up strategies will face increased scrutiny, and parties may now be required to answer questions about prior transactions that are unrelated to the transaction being investigated. • Vertical Integration. Transactions involving vertical integration will be deemed presumptively anticompetitive if one of the parties has a 50% or more share in its market, even if the other party is only a small player in its respective market. This increases the antitrust risk of complementary/add-on transactions that may have received little or no scrutiny under the old Guidelines.
8 | BASS, BERRY & SIMS
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