Increasingly, state antitrust enforcement authorities are taking an interest in and/or becoming involved in the review of hospital transactions. While parties often focus on the review process at the Federal Trade Commission (FTC), careful planning will take into account the fact that the State antitrust authorities may become involved as well. Among other things, it is common for FTC staff to coordinate a review of a transaction with State officials. 

A State's antitrust division falls under the authority of the State Attorney General. The State AG's office often has interests that are much broader than a strict antitrust analytical framework, and so advance discussions with the State AG can help facilitate an antitrust review. The following is a list of considerations to keep in mind when considering state involvement in review of a hospital transaction:

1)      Consider talking to the State AG first.

As noted above, it is likely the FTC will involve the State in any review of the transaction, and in some cases there can be a benefit to talking to the State AG before talking to the FTC or before filing an HSR form. Among other things, the State AG is more likely to have an understanding of the involved hospitals and the market. As noted above, the State AG often has interests that extend beyond traditional antitrust analysis. For example, the State AG may have concerns related to the impact the transaction will have on jobs in the community, or the likelihood that a hospital may fail. In addition, the State AG may be more interested in considering issues that do not derive from the hospital transaction itself, but relate instead to the vertical integration impact of the transaction. As a result, in some cases an early visit to the State AG can be informative and helpful.

2)      The State AG may be more familiar with the market at issue. 

Often, an initial step in the FTC's review process involves getting the FTC staff familiar with the geographic market at issue. If the State AG is involved, the State AG may have a more advance and/or refined understanding than the FTC as to the relevant geographic market, of the importance of various hospitals in the market or of other issues related to the hospitals. In addition, the State AG's office may be more aware of how payors, employers, physicians and/or patients in the area view the hospitals involved – and be readily able to assess the credibility of any issues raised by those various parties. 

3)      The State may be more likely to enter consent decrees.

In some cases, the State may have an interest in ensuring the transaction closes, even if it perceives that there are some anti-competitive (or other consumer protection) issues. While the FTC is unlikely to enter into a consent decree to allow a hospital transaction to move forward, a State AG's office may be more willing to enter into such a consent decree to facilitate a closing. Although the parties may initially balk at the idea of having the State AG's office monitor post-closing activities, a workable consent decree negotiated by the parties that allows the transaction to close may still be preferable to an FTC action that prevents the deal from closing in the first place.

4)      The State AG can be an advocate.

Because the State AG is likely to better understand the market than the FTC, including the hospitals involved in the transaction, and may have an interest in seeing the transaction move forward, the State AG may end up acting as a "behind the scenes" advocate for the parties. If so, the parties may gain by having the State AG, as a third party observer of sorts, speaking on their behalf. 

5)      The State may follow the FTC's lead. 

On the other hand, in some cases, the State AG may merely want to follow the FTC's lead. The staffing resources at the FTC are usually greater than those of a State AG's office, so the State AG may decide to be more of a passive participant in the process. Even if that is the case, the State AG has wider latitude to come back later if issues related to the transaction arise, so it's important to remember that even in this situation, the State AG can be a critical audience. In addition, approaching what might otherwise be a passive State AG early in the process could highlight a transaction that might otherwise receive little attention from the State AG. 

While an early visit to the State AG is not appropriate for every transaction, it is an option that parties may want to evaluate when considering review by other regulatory agencies such as the FTC. Although the parties would not want to imply a transaction is likely to be viewed as anticompetitive, there may be circumstances when an early trip to the State AG may be beneficial.

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