State Policies on Health Care Provider Consolidation: Impact and Concerns
TL/DR –
The consolidation of healthcare providers has been a cause for concern among state authorities, especially concerning transactions involving private equity investment. To regulate this, states are implementing laws requiring healthcare entities intending to engage in certain transactions to notify and obtain approval from state agencies before finalizing the deal. The laws, which differ across states, may require healthcare entities to disclose detailed information about the transaction, with states like Indiana maintaining confidentiality of nonpublic information, while others, like California, treat all information as public record unless expressly designated as confidential by the submitting entity.
State Authorities Concerned about Healthcare Market Concentration & Competition
The consolidation of healthcare providers has triggered concerns among state policymakers about its impact on medical service availability and rising healthcare costs. Many worry about the role of private equity firms and if their profit-driven motives may compromise affordable, quality health care.
Healthcare Entities Face New Regulatory Challenges
In response to these concerns, states are enacting statutory regimes requiring healthcare entities to notify and sometimes seek approval from state agencies before completing certain transactions. This trend is spreading with nearly 20 states adopting such laws and others, like Texas, considering similar legislation.
Differences Exist Among State Premeger Notification & Reporting Requirements
State-level premerger notification and reporting requirements, or “mini-HSR” laws, vary greatly and healthcare stakeholders need to pay close attention to these differences when considering transactions. The definition of a “healthcare entity” and what transactions trigger the notification or approval process can differ among states.
Understanding the Boundaries of Healthcare Entity Transactions
Some laws apply only to transactions involving non-profit healthcare entities or certain provider types, while others apply to all healthcare entities, including HMOs and businesses providing general medical care. Navigating these laws often requires a thorough examination of applicable health care entities and transactions.
Transaction Review Laws: Disclosures and Timing
Transaction review laws also differ in terms of what transactions trigger the notification or approval process and the amount of information required for disclosure. For instance, Illinois transaction review law is triggered by a merger or acquisition, unlike Oregon’s review and approval statute, which is activated by “material change transactions.” Furthermore, notification timings vary among states ranging from 30 days prior to the transaction closing to up to 180 days in states like Oregon.
Confidentiality and Regulatory Oversight in Health Care Transactions
Confidentiality treatment differs among states, with some like Indiana ensuring nonpublic information is not released without the notifying party taking any action. However, in California, information submitted to OHCA is treated as public record unless designated confidential by the submitting entity.
Stay Updated on Healthcare Transaction Review Laws
It is critical that healthcare entities understand the state’s specific healthcare transaction review laws before entering into a transaction. Given the swift changes occurring in these laws, staying updated on current requirements and pending legislation is crucial.
Considerations for Healthcare Entities
Healthcare entities considering a transaction should keep the following considerations in mind: clearly identify review laws that impact their transaction; identify regulatory agency analysis factors; ascertain what information will be disclosed; comply with all filing requirements and respond swiftly to regulatory inquiries; understand that state transaction laws are separate from federal antitrust filing obligations; anticipate increased transaction timelines and be flexible in interpretation due to the ever-changing nature of these laws.
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