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What the private equity crackdown means for health care deals

Illustration of a stethoscope draped over the dome of the US Capitol building.

Illustration: Gabriella Turrisi/Axios

Our colleagues from Axios Pro: Health Tech Deals are here to tell you why the draft Senate bill to regulate private equity in health care is getting so much attention among dealmakers.

Why it matters: That's something you won't get anywhere else: Deals world talking to policy world.

What kind of pushback are you expecting from private equity and for-profit health service providers?

  • "I don't expect there to be much active coordinated pushback," says West Monroe head of health care M&A Nathan Ray.
  • Instead, he expects to see investors more clearly verbalize the value their strategies — including buying up and merging companies in the same market — have created.
  • Industry groups like the American Investment Council, alongside other health care and business organizations, have spoken in opposition and that pushback will likely continue, says Polsinelli principal Ashley Osak.

Are health care mergers slowing down in the wake of FTC and DOJ finalizing new merger guidance? Are there any other changes you're seeing from PE players in response to this legislation?

  • Short answer: not yet, dealmakers say.
  • "If I had a crystal ball, I would say it is possible we'll see a slowdown in the immediate aftermath of this bill passing (if it does), but that flow may pick back up within the 12-24 month time period following implementation," says Osak.
  • In the meantime, her firm is fielding more questions from clients on how to manage transaction timelines and filing deadlines amid heightened scrutiny.
  • The private equity community is more focused on state-level merger regulation, as blue states like California strengthen requirements, Osak and a health care investment banker tell Axios.

Could you see a point where PE providers would ever agree to disclose financial data, including around debt, as the bill requires to get a deal done?

  • Not without a legal framework enforcing it, dealmakers say.
  • Disclosure requirements around financials would be akin to "the nutrition label on food products," says Ray.
  • "I foresee only the minimum necessary being disclosed in order to be compliant with the final language of the law," Osak says.

Further reading:

Sen. Markey offers bill to block private equity deals in health care.

Senate to examine private equity's role in ER care.

Study shows increased patient risks at private equity-owned hospitals.

PE to pick up pace on health care IT deals, analysts say.

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