Provided by: Jennifer Kirschenbaum, Esq.
October 10, 2023
Seemingly, the government is making a play to disincentive or discourage investment by private equity in healthcare that would resulting in more consolidation. For proof of this thesis, we can look at the local level in New York with a new material transactions notice requirements for any singular or series of transactions, resulting in gain of more than 25 million in revenue for an entity, and we can look to the federal with the new FTC charges against one of the largest anesthesia providers in Texas, accusing them a price gouging as a result of their consolidation platform.
In the FTC action, the minority owner private equity firm was also named opening up their general partners and limited partner, monies as a potential avenue for recovery - noteworthy and newsworthy. Unfortunately, with most government cases, the ultimate issue is not whether the government is right or wrong to charge you, the ultimate issue is what are you willing to pay to get the government out of your business and to go away. US anesthesia, and the private equity fund in the mix, here, understand the stakes for themselves, and also the public. If the FTC receives any settlement whatsoever, this will be the first of many actions against private companies that have been consolidated, and have resulted in higher fee schedules with payors.
For the New York law that went into effect in August, we have one transaction that’s been posted to the NYS site as having disclosed, which was an internal re-organization, and cash out for certain Gastro partners in a large group. We have yet to see how the law will enable interference in transactions, and where New York State and interest by PE goes from here.
What I do know, for sure is both the FTC action in Texas and New York law and other surrounding states similar laws and regulations are likely to give pause, at a minimum, to certain investors funding private equity, and possibly the private equity firms themselves to potentially seek a less regulated industry then patient-serving healthcare. What a ripple effect will be may be hard to see given the cooling off period in general, as a result of rising interest rates, and the economy overall; time will tell.
