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AHLA's Speaking of Health Law
Navigating Private Equity in Health Care Amid Regulatory Scrutiny
Leslie C. Overton, Partner, Axinn Veltrop & Harkrider LLP, speaks with Rebekah Goshorn Jurata, General Counsel, American Investment Council, and Dr. Isabel Tecu, Principal, Charles River Associates, about antitrust agencies' increased scrutiny of private equity in health care. They discuss certain aspects associated with the private equity model, what the literature and studies are saying about private equity, and how to advise clients in the current environment. Sponsored by Axinn.
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Speaker 2:Hi , uh, I'm Leslie Overton . Uh , I'm a partner at Axon in the antitrust practice. And , uh, thank you for joining us for an A HLA podcast. I've got , um, two great speakers to talk about private equity today. Um, we've got Rebecca Shorn , ADA , who is the general counsel for the American Investment Council , or the A IC, which is a trade association for private equity. And we've also got Dr . Isabelle Ku , who is a principal in the antitrust in competition economics practice of Charles River Associates, or CRA. And I chose these , um, speakers because, well, Rebecca is , uh, as I mentioned, she is GC at a trade association for private equity. So she has a lot of knowledge about the business model and developments and can just give an additional perspective , um, beyond what we've been hearing from , uh, some of the , uh, antitrust agency leadership. And , um, Isabelle. Isabelle has done thinking on the relationship between antitrust and private equity and is written in the area. And I thought it would be helpful , um, to have an empiric perspective , um, for our discussion . The views expressed on the opinions of the speakers and do not necessarily reflect those of the speakers, organizations or their clients. So we're talking about private equity today because there has been a change in the way that , uh, private equity is talked about by antitrust agency , senior leadership in healthcare in generally. But a number of the concerns seem to be arising in the healthcare context. There's a perception that there's increased enforcement scrutiny on the financing model itself, as opposed to just a specific activity that is , uh, undertaken by , um, particular , uh, private equity companies. Um, but I want to just level set for everyone. So I wanna start with Rebecca and just ask her what is private equity?
Speaker 3:Well, first of all, thank you, Leslie, for having me join this podcast. We really appreciate it. We think it's an incredibly important , uh, discussion that's very timely, so happy to be here. And also very much appreciate the opportunity to level set and how we identify and we frame the conversation, what we mean, what is private equity. And I'll try not to be too much of a securities lawyer for those who are listening in. But you know, first and foremost, it's recognizing that , uh, private fund is a key component of the private equity business model. And a private fund is a closed in pool of private capital where the investors into that pool are all sophisticated and they include large public pension plans, insurance companies, endowments. And what they do is they commit capital for that fund, and we call them limited partners. And the fund exists in anywhere from around five to 10 plus years. And then you have a general partner that directs the fund operations and the , a typical fund is managed and advised by a private equity firm or a private equity advisor. And what's also important to recognize is that there's a fiduciary relationship between that advisor and the fund itself. And private equity advisors are registered with the Securities and Exchange Commission and subject to federal securities laws. So this is a regulated market, notwithstanding the fact that it is private, and it's also important to recognize that it is a long-term capital commitment. So it's very different from, you know, an everyday American who's saving or investing in the public markets where you can, you know, buy and sell on an immediate basis. And then if you think about what is the role of private equity in the US economy, I think it might be helpful to talk through that a little bit broadly before we dive in is that, you know, since 2022, private equity has generated approximately six and a half percent of the United States. GDP , which is $1.7 trillion. Private equity directly employees over 12 million workers earning a trillion dollars in wages and benefits. We also are proud of the fact that around 85% of private equity backed businesses are small businesses with fewer than 500 employees. And also workers employed by private equity backed companies earn higher salaries than the average American, which is critically important as many families are dealing with inflation . And then in the, as it relates to the benefits to the investors, over 89% of US public's public pension plans, excuse me, serving 34 million American workers have exposure to the US private equity. And private equity is the best performing asset class for investors. So it's a incredibly strong , uh, component of not just as US economy, but also to ensure that , um, everybody is able to save for retirement.
Speaker 2:Thank you, Rebecca. I don't , I don't think all of those , um, uh, details about private equity , um, are widely known. So I appreciate you sharing them. And I just wanted to give Isabella a chance , uh, if , if she has anything to add from an economic , uh, perspective. And it's no problem if you don't.
Speaker 4:Sure. First of all, also, thank you so much, Leslie, for inviting me here. It's a great privilege to discuss this topic with you. Um, as Leslie also already mentioned, I'm an antitrust economist. I'm by no means an expert in, in healthcare or health economics in particular, but I followed with great interest , uh, just the debate and the academic literature on the impact of private equity on competition both inside and outside of healthcare. So as, as Leslie mentioned , um, a few minutes ago, it seems that the antitrust agencies , um, are scrutinizing sort of the private equity financing model in particular, and not just specific transactions or specific conduct arising from that. So it may be helpful to think about from an economic perspective, what are those issues , um, that are associated with the private equity business model? I think Rebecca would probably agree that it's really hard to, to say the private equity business model. There's a lot of heterogeneity and what private equity funds do and what their specific strategies are or their specific expertise that they bring to deals. But then there are certain aspects that sort of, I think the public at large associates with private equity investments, and we can unpack all of those in more detail later on. But for now, I just want to sketch them out really briefly. Um, one is sort of the perceived short term horizon for the investment. Rebecca already mentioned it's four to 10 years plus, and it's often a lot longer than you would get in public markets where investors can cash out on their investments at any time. But still, there's this perception that private equity isn't in it for the long run operations of companies, it's in for turning them over to other owners who can then operate these companies in the long run. Um, the second one is debt financing. So private equity typically uses a lot of leverage , um, in the companies that they invest into , um, to finance their operations. And then the third one is probably less well known , but I think economically a really interesting point. It's an increased alignment between the management of the company and the owners of the company. So that in public companies, you often have executives that are running their company that are far removed from the, or hopefully not as far removed, but potentially far removed from the interest of the shareholders. Shareholders . And in private equity, private equity investors typically install executives that are aligned with them either because of existing connections or because they structure the incentives for the executives in ways that align closely with the profit maximization for the owners.
Speaker 2:Great . Go ahead . Go ahead . Sorry, go ahead Isabel.
Speaker 4:I just wanted to really quickly mention one other topic that often is con is discussed in the context of private equity , um, transactions, but is not unique, but just rollup acquisitions. But I think that has been one focus of the antitrust agencies lately. And rollup acquisitions just refers to acquisitions where a bigger player acquires or consolidates smaller companies in the same industry. That could be done by private equity, that could be done by a big , bigger tech company or just really any company. It's not unique to private equity. But the concerns I think the agencies have there is that these small acquisitions may, may fly under the radar of the pre-merger notification thresholds. And so they may not notice these transactions and may not , may not be able to look into them individually until the, the industry is already more consolidated. So I think that's the concern. And it may be particular acute with private equity because of the way the transactions may be structured. But then I think from an economic perspective, rollups are not necessarily anti-competitive. There's a great potential for synergies, for efficiencies, for economies of scales with these transactions. And not all roll ups , um, are acquisitions of close competitors. So I think that's very important to keep in mind.
Speaker 2:Yeah, and I , I think those are excellent , uh, excellent points and I was gonna make them and I think you made them , um, even better . So , so thank you for that . Um , Leslie ,
Speaker 3:I jump in , I'd like to Sure . Few reactions to that on , um, I agree with everything that Isabel said, but I think there's a few important points that I wanna kind of clarify. The, the first is also in just recognizing that there are fewer publicly traded companies today by half than more than 20 years ago. And so the way in which a historically a small business could grow and have access to capital is no longer as it relates to having an initial public offering. The IPO route, incredibly costly. It's, you know, and so increasingly the ability to have access to critical capital is being done through the private markets. And I think that's really important to remember as it relates to the role of private equity and capital in the US economy. Because if you can't have access to the public markets because it's too expensive or whatever other reasons, then it , how are these companies going to be able to expand and grow? Typically a private equity company is going to target a portfolio company and they may engage in a buyout transaction as Isabel identified is that they're either underperforming or they have reached a level at their growth where they can't continue to increase. And so they need help. And so I think that that's also really important is that private equity provides critical access to capital that otherwise can't be made either through typical bank loans or in the public markets. The other is that the antitrust agencies do try to argue that a private equity buyout is overly levered, and that's just not factual. We have the data and we understand that typically if you're going to be engaged in a buyout transaction where there is debt financing, the leverage is around one-to-one, it's nowhere near how a bank loan works. And also why that's important as it relates to sort of the alignment of interest that Isabel touched upon a little bit as well, is that if you're going to have debt financing into a purchase or access to capital at that portfolio company, there's an interest for it to be a going concern. Whereas if you got a bank example for a bank loan, for example, you are taking on cash deposits from consumers and you're loaning it to a small business and there's a maturity mismatch. So we're actually really proud of the fact that it's not levered and that there is actually an alignment of interest for the success of a portfolio company as well as the investors. And so with that, I'll allow us to continue on <laugh> .
Speaker 2:Alright . So I just wanted , I wanted to go back to what we're hearing from the agencies. And again, I do think we've seen, we've seen a shift, at least in terms of the language being , um, being used to describe private equity. We are seeing , um, just a sense of greater skepticism. And I think some people could even say hostility in , um, the Biden administration as contrasted to , uh, the Obama or the Trump administrations. And again, we've seen more of this painting , um, private equity with a broad brush rather than recognizing the heterogeneity , um, of the business model and of just the different, different companies and the way that they approach , um, um, approach their investments. And so , um, you know, in the Obama administration , uh, which I served in as a deputy Assistant Attorney general at DOJ , um, there , there was, there was a change to the Harts Scott Rodino , um, pre-merger filing form in 2011 that related to private equity attempting to address a perceived gap in the rules at the time. Um, and so, so there, you know , there was some interest , um, but DOJ issued a remedies guide that same year that is no longer in effect. Um, but it doesn't explicitly mention private equity. It talks about the importance of a purchaser of divestiture assets being one who will compete with the assets , um, long term during the Trump administration. We see my former , uh, colleague , um, former assistant attorney general Macon del Raheem explicitly focused on private equity, and he seemed to be trying to educate the public as to how the financial model has evolved over time. He gave a speech at the Georgetown Conference and explain , um, I'm , I'm paraphrasing here, that over the past two decades, private equity , um, has shifted and we found that private equity firms increasingly have strategies that are consistent with the division's conditions for approving divestitures , uh, divestiture buyers. And so, and we saw, we saw Macon's openness to private equity on a case by case basis, and he wasn't , um, giving them a, you know, a , um, housekeeping, a good housekeeping stamp of approval overall. But, you know , looking at it on a case by case basis , um, in the updated remedies manual in 2020 , um, he basically says that it basically says that the division will use the same criteria to evaluate both strategic purchasers and purchasers that are funded by private equity or other firms. And it says, indeed, in some cases, a private equity purchaser may be preferred, doesn't say always, doesn't say usually just in some cases, and again, a case by case approach. And, and I think now , um, if that case by case approach is continuing, it doesn't match up with the rhetoric that we're hearing . So, you know, when we, when we see the , um, when we see an agency workshop like we saw in the spring , uh, on healthcare , um, that is dealing with private equity, there, there was just, it was being talked about in, I would say , um, negative terms without reflecting this diversity that we are talking about now. Um, and there's also , uh, a , uh, um, a, a look that , um, the FTCs doing with respect to concentration in healthcare that is specifically calling out , um, private equity. And the , uh, the comment period for that, I believe ended in June. So, so if they're looking case by case , it it , it doesn't seem like that the way they're talking about the enforcement actions that they have , um, that they have brought. So , um, so I wanna just , uh, go back to, to Rebecca. Um, actually let me , let me go back to the study of nursing homes that gets mentioned sometimes , um, as showing why private equity is problematic in , uh, healthcare. And Rebecca, I think you might have some additional context about , uh, that particular study.
Speaker 3:Yeah, no , thanks, Leslie . I think, you know , um, before digging into some of the detail, you know, we believe that there's actually evidence and a history of strong performance of private equity investment in the healthcare space through the benefit of millions of patients across the US economy. And, you know, there's also a number of studies that actually have demonstrated and proven out the benefits to that, which, you know, in the interest of time, I'll just note that a IC provided a response to the D-O-J-F-T-C and HHS request for information on the role of private equity , um, investment in healthcare space. So I would encourage that, but as it relates to some of the , um, you know, discussion as it relates to potential allegations that private equity investment and various , uh, healthcare facilities could be detrimental, there is one that took , um, that received a lot of headlines and that was related to private equity investment in skilled nursing homes. Now obviously, the need for , uh, critically important care in skilled nursing homes goes without saying, and we don't want to, you know, in any way undercut the recognition of what important roles those facilities play. But when you're discussing an important policy discussion related to the healthcare industry, and if you have government agencies trying to articulate or argue that access to capital by a specific set of a business model should be curtailed, we think it needs to be a very, you know, constructive dialogue . And it should be an , it should be based on facts and data, and not anecdotal, but this one study that has been, you know, claiming that 20,000 deaths were premature were the cause by private equity is if you would do a deep dive and analysis into that study, it basically, we think that it shows how ambiguous and the , um, data associated with that is not as clear as it's been articulated in the headlines. So, for example, the authors in particular in that study even noted that there results are obtained from a reduced form analysis, and they admit that the theoretical effects of private equity ownership on patients are ambiguous. And a direct quote from that article, which is on page 10 38, is in quote , in context of nursing homes, the effects of PE ownership on patients are theoretically ambiguous. It's also important to note that the authors themselves in that study admit that the results should be interpreted only in partial equilibrium and should not necessarily suggest, excuse me, suggest restricting private equity acquisitions. So I do believe that it demonstrates that this is a complicated area, and if you're going to be drawing significant conclusions that are headline grabbing, it's important that that data is actually representative is really , um, robust. And also we have a conversation where we can have other academics and economic literature also be brought into the board .
Speaker 2:I wanna bring Isabel back into this and just get her thoughts on just , uh, just studies in this space and if there's anything to add on , um, what Rebecca's perspective was with respect to that , uh, skilled nursing homes , uh, study.
Speaker 4:Sure. Um, yeah, I don't wanna comment on that study in in particular, but I think just a , as a general caveat , um, with, with these empirical studies , um, I wanna say that identifying causal effects of private equity acquisitions is really challenging empirically. So I think , um, you know, of the research designs involve comparing facilities or companies that have been acquired by private equity to those that have not been acquired. But that kind of assumes that these com that these facilities can be compared. And oftentimes researchers have some data on these facilities and can match them up, but private equity does a lot of due diligence when they acquire facilities, and they, it's, it's very likely that they have additional better data that allows them to selectively acquire facilities. So if you just compare the acquired to the non acquired facilities, that can lead to biased outcomes because we are not taking into account that the acquired facilities may have been on a different path already in ways that we cannot observe as an outside researcher. So that's one, one complicating factor. The other one is specific in the healthcare setting. It could also be, and I think some studies try to control for this, is that the patient mix may actually change after the acquisition. So if you're just comparing outcomes before and after the acquisition of private equity, you may not be taking into account that the , that the type of patients being seen by the facility also is changing. So you may see better or worse outcomes, but it may just be because the set of patients that is being treated by the facility could be changing. So that's another challenging factor to consider in these studies. I think most of the literature tries to control for these things, but I don't think there's always a perfect way to do it. So with that caveat in mind, I don't wanna sort of say it's impossible. There's a lot of literature out there, and I think it makes a sense to look at it holistically across multiple studies and not just focus on one particular study with one particular set . Um, and I think if we step back and look at it more broadly, I think there are studies where we have to acknowledge there is , um, you know, some studies caution us about there could be effects where private equity can exploit market imperfections that could, that that could be in a way that could be detrimental to consumers in , in age in and specifically in markets where there are such imperfections and healthcare could be one of them. Where there is a lot of markets are not functioning well, there are regulations that may create per perverse incentives. So that could definitely be a possibility and we need to be caution of that. But then more broadly, there are also lots of studies that point to mixed or even positive results of private equity acquisitions. For example, there's a study of Florida restaurants where private equity acquired some restaurants in Florida, and after those acquisitions compared to a control group of restaurants, these restaurants were more likely to pass health inspections, so they did better on health inspection scores, and that translates into higher quality for consumers. So there are these positive stories as well. So I don't think we can just say, you definitely not take a blanket view of private equity being detrimental from a consumer perspective. And I think even going back to the, to the healthcare setting. So we have mixed results, I think for the nursing homes. Um, I think there's, there are , there's , there are additional papers that look at the acquisitions of hospitals or physician practices by private equity, and they often find mixed results. I think it, it's probably oversimplifies things, but my very cursory reading of the literature is that oftentimes there is evidence for higher costs for higher prices, but also higher quality of care. So it's really unclear how that cuts for , for consumers.
Speaker 2:I , I, I appreciate that perspective, Isabel. And could you, we , we talked , um, we touched on before the concept of short-termism , um, from an economic , uh, perspective. Um, and we also heard Rebecca say that , um, that the timeline could be anywhere from, you know, four to 10 years plus. I just wanted to just get a little more from you, Isabel, on, on whether we should be suspicious of private equity from a short-termism standpoint.
Speaker 4:Yeah, that's a great question. So I think if, if capital markets are functioning as they should, and there is no, you know, hidden information and private equity owners sell their companies, they're really getting money not just from sort of extracting money during the holding period, but from selling the companies to other owners at the end of the holding period. And if they really mismanaged a company and were trying to sort of front load profits and just basically have selling the companies just for scraps, then they wouldn't be getting money when they were selling the company, right? So just from an economic perspective, assuming that financial markets are working well, it really shouldn't matter what the horizon is under which you're investing, you should always be countering, you should always be maximizing sort of in the longer term because you know that the exit value selling the company at the end is a function of the long term possibility to generate revenues with that company. So I think that's, that's one way in which I think this, this focused on short-termism is, is misplaced because they're really, from an economic perspective, it really shouldn't matter how long your investment horizon is. Um, but then even if we grant for the sake of argument that private equity owners are sort of in it for the shorter term, as Rebecca already pointed out, the alternative is often even more short term , right? So if it's a publicly traded company, they are trying to maximize profits for every quarter. And, and that is , um, so private equities horizon of a few years is , is long compared to that . But then I think probably we're turning more to the economic perspective, right? Short-termism per se, looking at competition also doesn't have clearly anti-competitive effects . There isn't really a clear story of how, even if a company is more short run oriented, that would translate to anti-competitive incentives. On the contrary, I think you have incentives that are going the other way that in the short companies that are more focused on profits in the short term , rather in the the long term , are more likely to undercut collusion or co the coordination mechanisms in an industry and, and sort of this act as a maverick right to, to shake up and make the industry more competitive because they are not gaining from being part of a, of a cartel in the long run. They're really gaining from undercutting and competing aggressively in the short run.
Speaker 2:Thank you. That was, that was super helpful. So I just wanna , um, come back to Rebecca's point about healthcare being a complicated area. Um , and the fact that a number of these private equity concerns do seem to come up in the healthcare context. And so one of the things I wonder is whether private equity is getting tagged with , um, certain perceived outcomes that may relate more to healthcare policy and the complexity of the healthcare landscape as opposed to competition policy. And I'm not saying in every case, but I'm saying I think this may be happening in some instances. So for example, if there's a reduction in force following a private equity acquisition of a healthcare entity, it could be a stretch. Um, you know , depending on the facts, it could be a stretch to suggest that it's due to private equity being inconsistent with quality care. It could instead reflect that that entity was in distress, pre-acquisition and on an unsustainable path. And we know , uh, in a number of instances, private equity looks for distressed assets , uh, because they can maximize value. And so if you've got an entity that was in distress on an unsustainable path, you know, could have had a especially bad payer mix , it's largely public payers , um, where the reimbursement levels are, are challenging and are are inadequate. And, you know, I I think sometimes, sometimes people don't consider what the but for world looks like if there hadn't been , um, a private equity , private acquisition, you know, would that , uh, healthcare entity simply have , uh, have failed because it , because of the challenges it was facing as a result of , um, just, it , it its its own factual situation and healthcare , um, the , the challenges with our, our healthcare , uh, system , um, that so many of our, our , uh, providers , uh, face. So I wanted to get Rebecca's view on the role of healthcare policy here , um, and, and anything she might have to add about how private equity has been able to help healthcare entities, which I don't think often gets a lot of attention.
Speaker 3:Yeah , no , thank you, Leslie . That's a really important question, and it's also one where I wanna take the opportunity to sort of level set the important but rather limited role that private equity plays in with healthcare system. So private equity has invested almost a trillion dollars in healthcare systems since 2006, and that might sound like a lot, but the US has spent nearly $3 trillion on healthcare in 2006 alone. Health spending has increased yearly to more than $4.3 trillion in 2021. And so if you look at from a comparative perspective, what is the role of private equity, it shows how incredibly complex and large the US investment in the healthcare industry. It is , you know, across the board. And, you know, even as recently as this may we ha um , an important op-ED came out by Dr. David Bernstein of the Harvard Combined Orthopedic Residency program at Massachusetts General Hospital. And Dr. Jaya Kumar, an assistant professor and director of value-based healthcare and outcome measurement innovations at the University of Texas at Austin Medical School published an op-ed, where they examined the false claim that private equity is the root of America's healthcare crisis. And importantly, they wrote, quote , with nearly two out of every $10 in the US economy spent on health, we must get to the root cause of why the current system is failing. While it's expedient to blame private equity, it fails to address the underlying flaws in the current healthcare incentive structure. And one specific example that relates to one of the challenges in the healthcare space as it relates to hospitals. Hospitals where they're , you know, located in the rural areas of the United States, typically have a significant majority of their revenues generated by federal funding. And unfortunately, the way in which the US healthcare space, if you're receiving either, you know, reimbursement from the federal government, that hospital will already be operating at a loss. And so one important area where private equity investment happens in the rural space is increasing and expanding access . So we have, you know, some important stories that do need to get told that we're trying to get out there. And one, as it relates to private equity investment in urgent care, expanding access to healthcare in the rural communities. So more than 130 rural hospitals have closed nationwide from 2010 to 2021. And according to a recent analysis, 418 rural hospitals in the United States are vulnerable to closure. So whereas, you know, private equity has provided $15 billion in critically needed investment in more than 250 urgent care clinics as of 2020, many of which are in rural locations. So that's where you can see that there is a disconnect between the ability for a hospital to get the needed financing to stay afloat and the, you know, private capital and private equity advisors bringing in important investments to make sure that there is access to healthcare across the United States in the metropolitan areas. Another area of significant success of private equity investment in healthcare is in lifesaving treatments. You know, private equity has played a key role in developing treatments as with respect to leukemia, Alzheimer's heart disease, HIV, and breast cancer. And then there's also a number of studies where, I won't go into the detail, but it demonstrates the improved performance and operations by hospitals as well as primary care physicians. And even more recently, we've become , um, uh, aware in trying to discuss the relevant, important investment in the fertility space of the healthcare. So it's, you know, and just kind of walking through that, you know, survey, right Leslie, it demonstrates that healthcare is across many facets from lifesaving treatments and drug financing and creation to, and improving access to healthcare in the rural areas.
Speaker 2:Thank you very much, Rebecca. I wanna just quickly move to enforcement and to counseling tips, and so we're not gonna get into the nitty gritty of different enforcement actions on this call. Um, you know , that , that , um, certainly that is , um, available on the FTCs website in particular. Um, I , I would say just as an overview, we're seeing attention paid to , um, you know, alleged roll-up strategies, you know, as , as we heard , uh, alleged interlocking directorates , uh, et cetera . And, and I'm not, I'm not making any comment on whether the facts , um, merit that or not. What we've been talking about is whether the agencies are going after private equity because it's private equity as opposed to , uh, because , uh, they have a concern about, you know , um, alleged , um, activity. Um, and so, and I would also say we expect proposed changes to the Hart Scott Rodino pre-notification merger, pre-notification rules to sweep in a lot more information , uh, in private equity related matters and add a lot of additional burden. So I just wanted to just quickly touch on counseling tips , um, in , uh, an environment where we, we do at least perceive that there is greater scrutiny on private equity, whether that's just rhetoric , um, uh, and , and doesn't reflect actual , um, enforcement , um, policy, you know , um, who knows? But it, it sure does look like there is more scrutiny. Um, and so I remind clients about the importance of being careful and intentional about how they write documents and what they're trying to accomplish and how why, and , um, what they expect the results will be. So those documents are accurate and not misunderstood. Um, I I also, I think it's important for clients to recognize that the term rollup is , uh, currently disfavored and viewed in a negative way. Even though as , um, you know , as we've heard on this call, they are a rollup is not inherently anti-competitive. It can be anti-competitive, but it is not inherently anti-competitive. Um, and so , so I tell, I tell clients to be thoughtful and, and intentional and accurate in their everyday dealings way before transactions on the radar, and they can think of that as a gift to their future selves. And I also remind them that just because a deal is non-reportable doesn't mean it will always stay under the radar. And again, when I was a deputy assistant attorney general , um, I gave a speech on non-reportable transactions to educate the bar and the business community about how DOJ finds out about such deals, hearing concerns from the industry, whether contacts that , um, staff has or strangers reading the trade press and the like, and , um, the agency's willingness to investigate and challenge, including post consummation. And then finally, I also want my clients to remember that staying under the radar is easiest when there are no misunderstandings by their customers, suppliers or competitors relying on an input that the client has acquired that would lead any of those entities to believe they're experiencing some kind of competitive harm from the transaction. And because if they do believe that, they certainly , uh, can , uh, complain to the government and the client's actions, including effective communication with stakeholders post-transaction matter, and not just in the immediate , um, aftermath . So we're just , so I'm Isabel and Rebecca , each of you just , um, to give any final thoughts on anything you think we haven't covered or anything you wanna emphasize?
Speaker 3:Sure. Thanks la I'll go ahead and jump Isabel . So I think that, you know, first and foremost, we would agree that private equity investors have the same obligations as any market actor to abide by the antitrust laws, but they're also entitled to the equal application of those laws. Enforcement of antitrust laws should be aimed at supporting competition and not generalized and unfounded concerns about a specific business model. So I think, you know, in making sure that if the antitrust agencies are going to be evaluating , uh, particular transaction, it should be done in a fair and objective manner, consistent with how previous bipartisan merger guidelines were applied to the treatment of private equity backed transactions. And in particular, we find it very troubling the public statements that, you know, the chairman of the FTC, or excuse me, chair Khan of the FTC as well as the DOJ assistant Attorney General Cantor as it relates to a specific business model, demonstrates, you know, potentially not necessarily a fair and violent balanced approach. Um, and so given the significant investment to the US economy at large, evaluating a particular, or targeting a particular business model does not seem to be appropriate.
Speaker 2:Thank you. Rebecca. Isabel?
Speaker 4:Yeah, I think, I think it will be really interesting to see how the new merger guidelines that came out last year will be applied because they have some provisions targeting or that seem to be aimed at private equity in particular. Um, I think one of those that stands out as sort of just a , um, a catchall guideline that, that even , um, that due to the, that the structure or the incentives of the acquirer, the FTC may or DOJ may have concerns with a merger. I think that will be interesting to see how that's being acted out. And if they, if that's enough to bring a case , um, I think that would be very drastic. Um, and I think I also want to, from a, from an economic perspective, I think I just wanna echo what , um, Rebecca already said. Taking a step back, I think it's important to consider the role of private equity and sort of well-functioning capital markets, that it's really another way to allocate capital efficiently to companies that are in distress or where the current management isn't doing a good job. So as economists , we refer to the , the market for corporate control, like you can fire the current management and replace it with somebody who does a better job at stewarding those assets. And that's an important role that private equity , private equity addresses. And so if there is very one-sided enforcement against this business model in particular, that may have chilling effects somewhere else in the economy as well in the , in the capital markets.
Speaker 2:Well, thank you Isabelle. And I'll just say, you know, my view, hopefully it's come across , um, you know, my view is just that , um, approaching private equity matters on a case by case basis, like you would approach any , um, type of company , uh, matter on a case by case basis , uh, is, is an appropriate way to proceed and also just , um, really makes the most sense given the heterogeneity , um, that we're dealing with. And , and you don't end up , um, accidentally , um, uh, accidentally scapegoating a particular business model or a, you know, a a particular , um, part of the economy. So I hope that this session has been , um, has been helpful and , um, that your , the listeners have gotten something out of it and have a greater understanding of the issues , um, surrounding the connection between private equity and healthcare and antitrust. Um, and we're just very appreciative for you taking the time to listen.
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