How to blend antitrust and health care M&A strategy

Economic Antitrust and Competition Services for M&A Transactions

The EY Economic Antitrust and Competition team helps companies evaluate proposed M&A deals from an economic antitrust perspective. Learn more.
Read more

Regulators want to analyze the complex competition matrix early. A buyer’s failure to consider antitrust issues early in the M&A due diligence cycle can result in delays, hefty breakup fees or deal abandonment. Both sides of qualifying deals of more than $126m must independently provide the Federal Trade Commission (FTC) and the Department of Justice Antitrust Division with a competition assessment and synergy analysis, if prepared, and other upfront details before a deal can proceed.¹

Forward thinking investors, however, can take control of the deal narrative with an approach that blends business strategy diligence with economic antitrust scenario modeling to uncover synergies and divestment scenarios. This approach can help buyers not only avoid deals being blocked but also accelerate the strategic plan during M&A integration, helping to build shareholder value.

Persistent regulatory scrutiny comes as the US M&A climate appears to be warming. The EY-Parthenon Deal Barometer projects a 10% increase in US M&A activity in 2025; deals are likely among US hospitals, doctor practices, post-acute, home health, ambulatory surgery and pharmacies.² Of the 1,735 deals that met the HSR reporting threshold in 2023, 73 were in health care and of those, six were flagged for a second review, an EY-Parthenon analysis shows.³ However, the number of deals likely subject to secondary review at the federal level understates the issue since US health systems are overwhelmingly not for profit and these organizations’ deals need to navigate state reviews.

Regulators may block a transaction if it could incentivize the merged enterprise to raise prices or lessen quality for patients and members. Regarding labor, regulators also can block deals that decrease salaries or quality of care delivery. However, in the evolving landscape for health care M&A, economic antitrust considerations can be an opportunity for health care leaders to be prepared for likely regulatory negotiations and respond quickly to regulators’ red flags.

Key assessment factor	What it is	Double-click	Health care examples
Horizontal competition analysis	A detailed understanding of how the two merging parties directly compete in terms of pricing, products and geography.	Antitrust regulators generally assess horizontal concerns by measuring the substitutability of the buyer’s product with the target’s product. If the merger joins two companies with highly substitutable products, regulators may find that the merger creates the incentive to raise prices, decrease wages or decrease quality to save costs.	If major hospital systems in the same geographic region merge, regulators may be concerned that the combined entity would dominate the market and reduce competition for patients needing hospital care, which may then result in decreased quality of care, higher prices and/or reduced wages.
Vertical competition analysis	When a merger allows the company to use its market power in one market to raise prices in another related market.	Antitrust regulators are likely to scrutinize proposed M&A where one company might have a market share of over 50% of one market and is acquiring a supplier or customer it services. This acquisition may allow the company to prevent other competitors in those markets from selling or receiving products they would otherwise need.	If a large health insurance company acquires a major hospital chain, regulators may be concerned that the insurer would favor its own hospitals, steering patients there by offering lower copays or better coverage, while limiting reimbursements or imposing higher costs on competing hospitals.
Pro-competitive synergy assessment	Synergies identified in M&A diligence can illustrate that the deal improves outcomes for consumers.	Potential value created, with supporting detail, should be presented as part of antitrust arguments for regulatory tests. For these synergies to be considered “cognizable efficiencies” by the courts, they must be quantifiable, verifiable, accrue to the benefits of consumers and be specific to the merger. Prior history of realized synergies can provide a compelling narrative to regulators.	More than 80% of payer and provider deals and more than 70% of distributor and health care services deals achieved or overachieved synergy targets within an average of two years post close, exhibiting that substantial value can be realized, according to an EY-Parthenon team analysis.

Key assessment factor

What it is

Double-click

Health care examples

Horizontal competition analysis

A detailed understanding of how the two merging parties directly compete in terms of pricing, products and geography.

Antitrust regulators generally assess horizontal concerns by measuring the substitutability of the buyer’s product with the target’s product. If the merger joins two companies with highly substitutable products, regulators may find that the merger creates the incentive to raise prices, decrease wages or decrease quality to save costs.

If major hospital systems in the same geographic region merge, regulators may be concerned that the combined entity would dominate the market and reduce competition for patients needing hospital care, which may then result in decreased quality of care, higher prices and/or reduced wages.

Vertical competition analysis

When a merger allows the company to use its market power in one market to raise prices in another related market.

Antitrust regulators are likely to scrutinize proposed M&A where one company might have a market share of over 50% of one market and is acquiring a supplier or customer it services. This acquisition may allow the company to prevent other competitors in those markets from selling or receiving products they would otherwise need.

If a large health insurance company acquires a major hospital chain, regulators may be concerned that the insurer would favor its own hospitals, steering patients there by offering lower copays or better coverage, while limiting reimbursements or imposing higher costs on competing hospitals.

Pro-competitive synergy assessment

Synergies identified in M&A diligence can illustrate that the deal improves outcomes for consumers.

Potential value created, with supporting detail, should be presented as part of antitrust arguments for regulatory tests. For these synergies to be considered “cognizable efficiencies” by the courts, they must be quantifiable, verifiable, accrue to the benefits of consumers and be specific to the merger. Prior history of realized synergies can provide a compelling narrative to regulators.

More than 80% of payer and provider deals and more than 70% of distributor and health care services deals achieved or overachieved synergy targets within an average of two years post close, exhibiting that substantial value can be realized, according to an EY-Parthenon team analysis.

Why you need a better antitrust approach in health care M&A diligence

In brief

Summary