AHA Letter to the Attorney General and FTC on Draft Merger Guidelines

September 13, 2023

Re: FTC-2023-0043: Draft Merger Guidelines

Dear Assistant Attorney General Kanter and Chair Khan:

On behalf of the American Hospital Association’s (AHA) nearly 5,000 member hospitals, health systems and other health care organizations, and our clinician partners — including more than 270,000 affiliated physicians, 2 million nurses and other caregivers — and the 43,000 health care leaders who belong to our professional membership groups, the American Hospital Association (AHA) submits the following comments on the Federal Trade Commission’s (FTC) and Department of Justice’s Antitrust Division’s (DOJ) (the Agencies) July 19, 2023 draft merger guidelines (Draft Guidelines). As the nation’s largest association representing hospitals, the AHA is uniquely positioned to offer on-the-ground perspective about how the Draft Guidelines would impact hospitals and the communities they serve.

In general, the AHA agrees with other commenters that, similar to the Agencies’ recent proposed amendments to the Hart-Scott-Rodino form and instructions, these Draft Guidelines reflect a fundamental hostility to mergers.¹ For example, citing a concurring opinion from a 50-year-old case as controlling law, the Agencies assert that the antitrust laws “reflect a preference for internal growth over acquisition.”² That is plainly incorrect, but it is revealing about how the Agencies currently think about mergers and acquisitions. The Supreme Court has repeatedly held — and the Agencies have repeatedly acknowledged — that the antitrust laws reflect a preference for competition as “‘the best method of allocating resources in a free market.’”³ Indeed, the Clayton Act asks whether a merger is likely to “lessen competition” or “tend to create a monopoly.”⁴ And, critical here, it is well-established that mergers often promote competition.⁵ It is therefore deeply concerning that the current FTC and DOJ leadership seem to believe mergers are not a “preferred” means of growth. This policy judgment contravenes the plain text of Section 7 and decades of precedent, and it threatens the potential for competition in many fields—none more essential to the country than the hospital field.

More specifically, the AHA shares many additional concerns expressed by other commenters including:

• The new (and lower) structural presumptions in the Draft Guidelines are arbitrary and allow for too much discretion by the Agencies to indiscriminately derail a beneficial transaction;
• The Draft Guidelines place far too much weight on cases from the 1960s and 1970s, largely ignoring modern cases and economic scholarship; and
• The Draft Guidelines undervalue cost savings and other efficiencies, which are often a major driver of hospital transactions and are materially beneficial for patients and surrounding communities.

We need not repeat these comments here, and instead urge the Agencies to take them into consideration as they determine the best course to take with these problematic Draft Guidelines.

The AHA writes separately to underscore our serious concern about the Agencies’ failure to provide meaningful guidance to hospitals. According to the Agencies, the Draft Guidelines are intended to provide “transparency” with respect to enforcement policy.⁶ But if transparency is the goal, then the last two years, including the Draft Guidelines, represent a significant step backward.

During this period, the Agencies have withdrawn valuable guidance while simultaneously pursuing aggressive theories of harm. For example, the Agencies have:

• Withdrawn the 1993 Enforcement Policy Statements in the Health Care Area, the 1996 Statements of Antitrust Enforcement Policy in Health Care, and the 2011 Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (the “Health Care Statements”);⁷
• Withdrawn the vertical merger guidelines only a year after they were issued;⁸
• Pursued a novel and flawed approach to defining geographic markets in a hospital merger challenge;⁹ and
• Wasted party and government resources analyzing far-fetched “cross-market” theories of harm that have no basis in statutory text or case law.

Most troubling is the Agencies’ decision to withdraw the Health Care Statements (Statements). The Statements were developed based on the recognition that in a field as important to the health and vitality of American people, guidance about the types of arrangements and transactions that would promote competition is highly beneficial. To make those guidelines even more effective, the AHA repeatedly asked the Agencies to update them to bring them into better alignment with “with contemporary practices in the health care and hospital field.” The Agencies declined to do so and instead withdrew them without notice.¹⁰ This is the opposite of transparency, much less good government. Leaving health care providers without any particularized guidance on dozens of important issues has far reaching impacts on patients and communities that the Agencies never considered.

Against this backdrop, the Agencies now offer draft merger guidelines that provide virtually no meaningful guidance to hospitals and health systems. The Draft Guidelines ignore serious flaws in contemporary enforcement practice and overlook recent judicial opinions that contradict their more aggressive proposed changes. The Agencies propose a structural presumption that is arbitrarily low and potentially fatal to beneficial transactions. And the Draft Guidelines largely eschew the many benefits of horizontal and vertical integration in the health care industry — a benefit the Administration recently acknowledged when announcing a new effort to reduce fragmentation in the health care system.¹¹

The Agencies should tread much more lightly. Though not perfect, the 2010 Horizontal Merger Guidelines and 2020 Vertical Merger Guidelines reflected a thoughtful balance between economic theory and antitrust law. The Draft Guidelines abandon this balanced approach, relying on outdated judicial opinions that more recent scholarship has shown to be flawed. The Draft Guidelines also abandon the bipartisan spirit of the 2010 Guidelines, replacing it with a transparently partisan approach that is far less likely to be respected by courts. The Agencies should rethink this sharp departure from existing practice. They should focus on opportunities for incremental improvement rather than re-inventing the wheel. They should not finalize the Draft Guidelines.

Read the full letter.

1. Letter from M. Hatton to Hon. Lina Khan (Sept. 5, 2023) (urging FTC to withdraw proposed changes to premerger notification rules) (hereinafter “AHA Comments to HSR Amendments”), available at https://www.aha.org/lettercomment/2023-09-05-aha-urges-ftc-withdraw-proposed-changes-premerger-notification-rules#:~:text=The%20AHA%20shares%20the%20concerns,screen%20transactions%20for%20closer%20review.
2. 2 Draft Guidelines at 11.
3. 3 Pls.’ Suppl. Mem. on Buy-Side Case at 2, United States v. Anthem, Inc., No. 1:16-cv-01493, (D.D.C. Dec. 19, 2016) ECF No. 410 (quoting Nat’l Soc’y of Prof’l Eng’rs v. United States, 435 U.S. 679, 695 (1978)); see also Fed. Trade Comm’n v. Superior Ct. Trial Laws. Ass’n, 493 U.S. 411, 423-24 (1990) (noting that statutory policy “precludes inquiry into the question [of] whether competition is good or bad”); Nat’l Soc’y of Prof’l Eng’rs, 435 U.S. at 695 (“The heart of our national economic policy long has been faith in the value of competition.”) (quotation marks and citation omitted).
4. 4 15 U.S.C. § 18.
5. See U.S. Dep’t of Justice & Fed. Trade Comm’n, Note by United States to Organisation for Economic Co-operation and Development, Conglomerate effects of mergers, at 5 (June 10, 2020) (“Mergers are one means by which firms can improve their ability to compete.”), available at https://www.ftc.gov/system/files/attachments/us-submissions-oecd-2010-present-other-international-competition-fora/oecd-conglomerate_mergers_us_submission.pdf.
6. Press Release, Fed. Trade Comm’n, FTC and DOJ Seek Comment on Draft Merger Guidelines (July 19, 2023), available at https://www.ftc.gov/news-events/news/press-releases/2023/07/ftc-doj-seek-comment-draft-merger-guidelines.
7. See Press Release, Fed. Trade Comm’n, Federal Trade Commission Withdraws Health Care Enforcement Policy Statements (July 14, 2023), available at https://www.ftc.gov/news-events/news/press-releases/2023/07/federal-trade-commission-withdraws-health-care-enforcement-policy-statements; Press Release, U.S. Dep’t of Justice, Justice Department Withdraws Outdated Enforcement Policy Statements (Feb. 3, 2023), available at https://www.justice.gov/opa/pr/justice-department-withdraws-outdated-enforcement-policy-statements.
8. See Press Release, Fed. Trade Comm’n, Federal Trade Commission Withdraws Vertical Merger Guidelines (Sept. 15, 2021), <available at https://www.ftc.gov/news-events/news/press-releases/2021/09/federal-trade-commission-withdraws-vertical-merger-guidelines-commentary.
9. See Fed. Trade Comm’n v. Hackensack Meridian Health, Inc., 30 F.4th 160, 168 (3d Cir. 2022) (following FTC’s patient-based approach to geographic market definition, despite fact that FTC previously defined markets around hospital location and 2010 merger guidelines require the same).
10. 10 Letter from M. Hatton to Hon. Jonathan Kanter & Hon. Lina M. Khan at 5 (Mar. 30, 2022) (hereinafter “AHA March 2022 Letter”), available at https://www.aha.org/system/files/media/file/2022/03/aha-urges-two-changes-to-ftc-doj-merger-guidelines-letter-3-30-22.pdf.
11. See Press Release, Centers for Medicare & Medicaid Services, CMS Announces Transformative Model to Give States Incentives and Flexibilities to Redesign Health Care Delivery, Improve Equitable Access to Care, (Sept. 5, 2023) (“‘In our current health care system, fragmented care contributes to persistent, widening health disparities in underserved populations[.]” (quoting CMS Administrator Chiquita Brooks-LaSure)) available at https://www.cms.gov/newsroom/press-releases/cms-announces-transformative-model-give-states-incentives-and-flexibilities-redesign-health-care.