FTC Commissioners Cite AAI Study on Private Equity in Healthcare in Support of Merger Action

On June 13, 2002, FTC Chair Lina M. Khan, joined by Commissioners Rebecca Kelly Slaughter and Alvaro M. Bedoya released a Statement in the matter of JAB Consumer Fund/Sage Veterinary Partners, a proposed acquisition of a veterinary practice group by a JAB, a private equity fund. The FTC determined the proposed acquisition would be anticompetitive and proposed an order allowing the transaction to proceed, but only with divestitures and with additional conditions to “establish key safeguards against future dealmaking that may also prove unlawful.” In particular, the proposed order would require JAB to seek advanced approval from the FTC for any acquisitions of veterinary practices within 25 miles of existing JAB facilities in three states and to provide advance notice for all veterinary acquisitions within 25 miles of a practice nationwide that is owned by JAB.  The statement explains that the provisions “allow the FTC to better address stealth roll-ups by private equity firms like JAB/NVA….” Citing AAI’s pathbreaking May 2021 joint report with the Petris Center, Soaring Private Equity in the Healthcare Sector: Consolidation Accelerated, Competition Undermined, and Patients at Risk, the Commissioners noted that “[a] focus on short-term profits in the health care context can incentivize practices that may reduce quality of care, increase costs for patients and payors, and generate appalling patient outcomes.” In line with the recommendations in the AAI/Petris report, the Commissioners state: “Strategic use of prior notice and prior approval provisions is one way that the Commission can better track and prevent unlawful acquisitions by private equity firms and other corporations.”