A look at healthcare M&A and antitrust coverage
The 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:
- FTC and Pennsylvania Attorney General Challenge Reading Health System’s Proposed Acquisition of Surgical Institute of Reading
- Regulator Orders Hospitals to Undo a Merger in Ohio
- Idaho hospitals hit rival with antitrust lawsuit
- OSF Healthcare System Abandons Plan to Buy Rockford in Light of FTC Lawsuit; FTC Dismisses its Complaint Seeking to Block the Transaction
- Statement of the Department of Justice’s Antitrust Division on Its Decision to Close Its Investigation of Highmark’s Affiliation Agreement with West Penn Allegheny Health System
- Supreme Court to Review Phoebe Putney Purchase of Palmyra
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