Antitrust regulations may be threatening nonprofit healthcare deals

A growing threat is emerging for nonprofit healthcare organizations, as antitrust regulations are increasingly scuttling deals months or even years after they are announced, a development that has FASB advisers with deep sector knowledge sounding the alarm.

"We're seeing transactions being announced, only to be rejected by regulatory agencies down the line," warned Brian Conner, partner at Moss Adams, during a Sept. 10, 2024, Not-for-Profit Advisory Committee (NAC) meeting, where he sounded the alarm on this trend.

Conner emphasized that this is creating a significant risk for not-for-profit healthcare organizations, which may be issuing financial statements based on a letter of intent or agreement to merge, only to have the deal fall through.

"In the intervening period, the activity of that transaction may not be quite as public, but you might be issuing a financial statement based on a letter of intent you've executed with the organization that you're going to do a transaction that could have an impact on how users view the ongoing viability of that business," he said. "There's a significant risk out there and a growing risk that you're not going to be able to get that transaction through a federal or a state regulatory agency."

Antitrust regulations, also known as competition laws, are rules and laws that aim to promote fair competition and prevent anti-competitive practices in various industries. These regulations are designed to ensure that businesses compete with each other on a level playing field, without engaging in behaviors that could harm consumers or stifle innovation.

In the context of nonprofit healthcare companies, antitrust regulations are designed to prevent anti-competitive practices that could harm consumers and stifle innovation. This includes prohibiting price-fixing, where companies collude to set prices for healthcare services, as well as market allocation, where competitors divide markets or territories to reduce competition.

Additionally, the Federal Trade Commission (FTC) and Department of Justice (DOJ) review mergers and acquisitions to ensure they do not substantially lessen competition or create a monopoly. Furthermore, nonprofit healthcare companies must avoid engaging in unfair methods of competition, such as misrepresenting services or prices, which can lead to legal action, fines, and reputational damage.

The topic was raised during the NAC's discussions about trends and emerging issues that could impact the sector. The committee advises the FASB on behalf of the not-for-profit sector, ensuring their perspectives are considered in setting financial reporting standards.

The discussions come at a time when the FASB is getting ready to issue an agenda consultation document to solicit public feedback about it's next technical agenda projects.

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