Home > Property & Casualty > A look at healthcare M&A and antitrust coverage

A look at healthcare M&A and antitrust coverage

healthcareMAThe PPACA (Patient Protection and Affordable Care Act) ushered in a new era of mergers and acquisitions activity in the healthcare arena, one which the Federal Trade Commission (FTC) has been evaluating with increased scrutiny. As healthcare systems scramble to acquire physician practices and other smaller facilities, the FTC is on the prowl to ensure these transactions do not have a dampening effect on competition in a given market. As an example, the FTC recently threatened to take Reading (Pa.) Health System to court over its planned acquisition of a neighboring outpatient hospital, arguing the transaction would raise prices and lower quality. The threat alone was enough to make Reading back out of the deal. This is just one example of several FTC antitrust actions against healthcare organizations since 2009, a trend which is expected to increase in the foreseeable future.

Historically, the majority of claims against private and nonprofit healthcare systems have involved employment practices issues, such as discrimination, retaliation or wage-and-hour suits. While sometimes costly, a single allegation of this type usually does not present the risk of eroding all available policy limits. That, however, is not the case with antitrust allegations, which can be very expensive from a defense cost standpoint and lead to a “full limit loss.”

Healthcare organizations need to be aware of what antitrust coverage that their Directors’ & Officers’ Liability policy (D&O) provides, as coverage can vary significantly by insurance carrier. Insured’s should look to avoid sub-limited coverage of antitrust claims, as this can prevent excess insurance policies from providing coverage for antitrust allegations. Some D&O insurance carriers will offer full limit coverage, but with a higher antitrust specific retention and/or coinsurance provision.

Healthcare consolidation is not likely to subside anytime soon. Buy-side health systems and providers need to make sure their D&O policy is positioned to provide the broadest antitrust coverage available in this era of increased regulatory scrutiny.

For more information on specific antitrust actions against healthcare organizations, click on any of the following:

William Gallagher Associates is a leading provider of insurance brokerage, risk management and employee benefits services to firms with complex risks and dynamic needs, within industries that include technology, life sciences, financial risks, health care, renewable energy & clean technology, and environmental services. WGA has offices in Boston, MA; New York, NY; Hartford, CT; Princeton, NJ; Columbia, MD; and Atlanta, GA.

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