◼ FINANCE Bloomberg Businessweek November 2, 2020
23alarms among doctors, researchers, and antitrust
regulators. The concern is that mergers and take-
oversarediminishingchoicesforconsumers,
potentiallyunderminingqualityofcareandraising
costs.DemocraticpresidentialcandidateJoeBiden
hassaidhe’dscrutinizeanti-competitivebehavior
inmedicine.
Foritspart,GenesisCaresaysthatoperatingon
a largerscaleimprovescare,becauseit allowsthe
companytooperatemoreefficiently,hiretopprac-
titioners,standardizeclinicalpractices,andengage
inresearch.“Alloftheseareadvancementsthatare
greatforcancerpatients,”it saidina statement.
Privateequityfundsraisemoneyfrominstitu-
tions and wealthy investors to buy large stakes in
companies and, typically, overhaul their manage-
ment. The industry’s favorite strategy in health care
is known as the roll-up: buying myriad small play-
ers to build a behemoth. Last year the investment
companies did 226 roll-up or “add-on” deals in
health care, almost quintuple the amount in 2015,
according to data provider Irving Levin Associates.
After several years, the private equity firms gener-
ally sell the company or take it public.
Many acquisitions are so small that they escape
the notice of regulators. The Hart-Scott-Rodino
Antitrust Improvements Act of 1976 requires com-
panies to flag only larger deals to the Federal
Trade Commission and the U.S. Department of
Justice Antitrust Division—currently, those worth
more than $94 million. (GenesisCare submitted its
purchase of 21st Century to regulators for review
before closing the deal.)
FTC Commissioners Rohit Chopra, a Democrat,
and Christine Wilson, a Republican, are calling for a
study of health-care roll-ups. “Through these strat-
egies, private equity sponsors can quietly increase
market power and reduce competition,” Chopra, a
former assistant director at the Consumer Financial
Protection Bureau, said in a July statement. A U.S.
House panel has recommended scrutiny of simi-
lar small purchases by technology giants such as
Amazon.com Inc. and Facebook Inc.
States are also intervening. Connecticut and
Washington have passed laws requiring notification
of even small health-care mergers. A similar bill in
California stalled amid pushback by private equi-
ty’s main lobbying group, the American Investment
Council. Jason Mulvihill, AIC’s general counsel, said
in a statement that regulators should avoid impos-
ing unnecessary burdens on investments in smaller
businesses. David Dahlquist, an antitrust attorney
at Winston & Strawn LLP, says his clients, which
include private equity firms, worry such laws could
proliferate, creating a chilling effect on deals.radiation therapist at 21st Century. “Naples is kind
of a cash cow,” he says.
Foryearsnow,privateequityhasbeenfollow-
inga similarstrategyina widerangeofmedical
fields—fromanesthesiologytohospicecare—buying
small practices and putting them under a corpo-
rate umbrella. With patients shunning in-person
visits and postponing elective surgeries amid the
Covid-19 pandemic, solo offices are struggling to
stay afloat and are under increased pressure to sell
to chains.
The private equity buying spree has raised
▼Privateequityroll-up
acquisitions
◼Doctors’offices
◼Other medical2001000
2015 2019ILLUSTRATION BY CHARLOTTE POLLET. DATA: IRVING LEVIN ASSOCIATES