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Healthcare Consolidation Under a Harris Presidency: Expect the Battle to Intensify

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Vice President Kamala Harris changed the course of healthcare transaction regulation in California while serving as the state’s attorney general. As president, she would have more powerful tools at her disposal, setting the stage for her to resume the fight against healthcare consolidation – this time at a national level.

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Harris first displayed her long-standing concerns with healthcare consolidation through her actions around healthcare transaction review as the California attorney general. Most states authorize their attorneys general’s office to review and approve nonprofit healthcare transactions involving the transfer of health facilities in the state. Such transaction review typically includes an evaluation for antitrust and consumer protection concerns, including an assessment of how the transaction may impact access to care, the healthcare job market and the cost of care. State attorneys general will also serve as <em>parens patriae</em> or otherwise lean on their state charitable trust authority to ensure that nonprofit organizations comply with state law when using, disposing of, or transferring charitable resources. California is no exception. In fact, the state has earned a reputation as one of the most challenging jurisdictions in which to obtain nonprofit healthcare transaction approval, largely due to enforcement and policy practices initiated under Harris.

After assuming command as California’s attorney general in 2011, Harris launched an investigation into the consolidation of hospital and physician practices, issuing subpoenas to some of the state’s largest hospital chains, including Sutter Health and Dignity Health. Under her leadership through 2017, this investigation and the office’s other work were instrumental in reaching the landmark $575 million settlement with Sutter Health in 2019.<a href="#_ftn1" id="_ftnref1">[1]</a> Harris also joined with federal regulators, including the Federal Trade Commission (FTC)<a href="#_ftn2" id="_ftnref2">[2]</a> and the Department of Justice (DOJ),<a href="#_ftn3" id="_ftnref3">[3]</a> in litigation to block mergers involving hospitals and health insurers.

During Harris’ tenure, California’s office of the attorney general was an outlier in its confrontational approach to healthcare transactions. The office took firm, and sometimes controversial positions on conditions for approving nonprofit healthcare transactions within the state. Since 2017, Harris’ successors have followed in her footsteps, through continued, stringent healthcare transaction review and by repeatedly sponsoring or supporting legislation to expand their review authority in the state. These legislative efforts were largely unsuccessful until recently. In June of 2022, and in the shadow of shifting federal antitrust policies, the California Legislature passed the California Health Care Quality and Affordability Act, which established the Office of Healthcare Affordability (OHCA).<a href="#_ftn4" id="_ftnref4">[4]</a> More recently, the California Legislature passed the highly anticipated private equity bill, AB 3129,<a href="#_ftn5" id="_ftnref5">[5]</a> which requires private equity groups or hedge funds to notify and obtain consent from the state attorney general before certain healthcare transactions.

Harris’ presidential run comes at a time when federal antitrust policy and state efforts have come to align with her record as the California attorney general. Following President Joe Biden’s 2021 Executive Order on Promoting Competition in the American Economy,<a href="#_ftn6" id="_ftnref6">[6]</a> FTC and DOJ have aggressively pursued actions to block healthcare mergers, withdrawn long-standing healthcare enforcement policy statements,<a href="#_ftn7" id="_ftnref7">[7]</a> released new merger guidelines<a href="#_ftn8" id="_ftnref8">[8]</a> and issued multiple public requests for information on healthcare consolidation.<a href="#_ftn9" id="_ftnref9">[9]</a> FTC and DOJ have also teamed up in a new strike force<a href="#_ftn10" id="_ftnref10">[10]</a> to combat rising costs in healthcare and other industries, indicating that federal regulators are scrutinizing antitrust issues from both civil and <em>criminal</em> perspectives. Meanwhile, more than a dozen states have enacted healthcare transaction review laws, while several others have introduced similar legislation.

This shifting landscape paves the way for a potential Harris presidency to intensify the battle against healthcare consolidation. As president, she may reappoint aggressive federal officials at key agencies, including FTC, or lean on legislators to expand federal review authority, particularly related to private equity healthcare transactions. She may further support joint FTC and DOJ efforts, which could lead to the first federal indictments related to private equity’s rising prominence in healthcare transactions in the past decade. Her support at the federal level may accelerate state adoption of healthcare transaction review laws to fill in the gaps left by federal regulators. In any case, Harris’ record in California leaves no uncertainty about how she would influence healthcare policy at the national level: Expect regulators to throw themselves into the fray, bringing increased scrutiny to healthcare transactions and enforcement actions to inhibit consolidation.

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<a href="#_ftnref1" id="_ftn1">[1]</a> <a href="https://oag.ca.gov/news/press-releases/attorney-general-bonta-announces-final-approval-575-million-settlement-sutter">https://oag.ca.gov/news/press-releases/attorney-general-bonta-announces-final-approval-575-million-settlement-sutter</a>

<a href="#_ftnref2" id="_ftn2">[2]</a> <a href="https://www.ftc.gov/system/files/documents/cases/140820statesbrief.pdf">https://www.ftc.gov/system/files/documents/cases/140820statesbrief.pdf</a>

<a href="#_ftnref3" id="_ftn3">[3]</a> <a href="https://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-joins-us-and-12-other-state-attorneys-general">https://oag.ca.gov/news/press-releases/attorney-general-kamala-d-harris-joins-us-and-12-other-state-attorneys-general</a>

<a href="#_ftnref4" id="_ftn4">[4]</a> OHCA is responsible for conducting cost and market impact reviews on reported transactions that impact healthcare services in California, among several other functions related to healthcare cost control.

<a href="#_ftnref5" id="_ftn5">[5]</a> <a href="https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB3129">https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202320240AB3129</a>

<a href="#_ftnref6" id="_ftn6">[6]</a> <a href="https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/">https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/</a>

<a href="#_ftnref7" id="_ftn7">[7]</a> <a href="https://www.justice.gov/opa/pr/justice-department-withdraws-outdated-enforcement-policy-statements">https://www.justice.gov/opa/pr/justice-department-withdraws-outdated-enforcement-policy-statements</a>, <a href="https://www.ftc.gov/news-events/news/press-releases/2023/07/federal-trade-commission-withdraws-health-care-enforcement-policy-statements">https://www.ftc.gov/news-events/news/press-releases/2023/07/federal-trade-commission-withdraws-health-care-enforcement-policy-statements</a>

<a href="#_ftnref8" id="_ftn8">[8]</a> <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/2023_merger_guidelines_final_12.18.2023.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/2023_merger_guidelines_final_12.18.2023.pdf</a>

<a href="#_ftnref9" id="_ftn9">[9]</a> <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/FTC-2024-0022-0001-Request-for-Information-on-Consolidation-in-health-care-markets.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/FTC-2024-0022-0001-Request-for-Information-on-Consolidation-in-health-care-markets.pdf</a>, <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/Serial%20Acquisition%20RFI_5.22.24.pdf">https://www.ftc.gov/system/files/ftc_gov/pdf/Serial%20Acquisition%20RFI_5.22.24.pdf</a>&nbsp;

<a href="#_ftnref10" id="_ftn10">[10]</a> <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2024/03/05/fact-sheet-president-biden-announces-new-actions-to-lower-costs-for-americans-by-fighting-corporate-rip-offs/">https://www.whitehouse.gov/briefing-room/statements-releases/2024/03/05/fact-sheet-president-biden-announces-new-actions-to-lower-costs-for-americans-by-fighting-corporate-rip-offs/</a>

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