Overview
During this webinar, the panelists discussed the growing number of notice and consent laws targeting healthcare transactions. They summarized and highlighted trends in recently enacted and proposed legislation, discussed the scrutiny surrounding healthcare transactions at the federal level, and offered practical strategies for minimizing the impact of these laws on deals.
Panelists:
- Travis Jackson, Partner, McDermott Will & Emery
- Sarah Kitchell, Partner, McDermott Will & Emery
- Joseph Parise, Partner, McDermott Will & Emery
- Joel Rush, Partner, McDermott Will & Emery
- Eric Zimmerman, Principal, McDermott+
Top takeaways included:
- Awareness of New State Oversight of Healthcare Transactions Is Critical. The number of enacted or proposed state laws requiring government notice or consent for healthcare transactions has grown sharply over the last several years as the number of transactions has grown. Historically, notice of healthcare transactions was related to licensure and certificate of need requirements. New laws often focus on cost, market, and access implications of deals and require the parties to provide information regarding the transaction and its impacts to regulators for a specified review period. In some states, there are waiting periods imposed before the transaction can close, and in other states regulators must approve the transaction before the parties can proceed. Staying on top of new state legislation is critical to avoiding pitfalls and delays in the deal process.
- New Laws Target Major Transactions but Capture New Entities. Not all transactions or investments in healthcare are subject to notice and consent legislation. Instead, recent state legislation has focused on certain types of major transactions, including mergers, acquisitions, transactions over certain value thresholds, or those with potential market consolidation implications (e.g., affiliations for payor contracting purposes). While these new laws often do not apply to smaller transactions, many apply to a broader range of entities, including various types of provider groups, management companies, and certain kinds of investors.
- Expect Some Uncertainty as Regulators Gain Experience With the New Laws. It is not always clear from the plain text of these laws whether a given transaction will be subject to a notice or consent requirement. And because of how new many of these laws are, regulators are still in the process of developing regulations and other guidance for these laws. Parties to a transaction should get comfortable with some uncertainty in this process and may need to work with experienced healthcare counsel to determine whether a given law is applicable in the first instance.
- Federal Lawmakers and Regulators Have Begun Focusing on Healthcare Transactions. Similar concerns regarding the number and size of healthcare transactions and the role of private equity in healthcare are present at the federal level. In recent years, executive agencies have shown a renewed focus on healthcare transactions through revisions to federal merger guidelines, new ownership and management disclosure requirements for healthcare entities participating in government programs, and requests for information on the impact of private equity in healthcare. In the US Congress, lawmakers have begun scrutinizing consolidation and investment in healthcare by private equity firms, as well as deal terms typical of these transactions. While several pieces of legislation targeting healthcare transactions have been introduced, legislative activity at the federal level remains less far along than at the state level. Executive branch agencies, however, have more discretion and have been and are expected to continue to be actively advancing policy changes. Interest in these areas is expected to remain regardless of the outcome of the election.
- Careful Preparation of Deal Documents and Structuring Is Crucial. The new slate of laws can increase the complexity, expense, and delay of healthcare transactions. This disruption can be minimized by staying on top of legislative activity in key markets and with thoughtful preparation before and at the very beginning stages of a transaction. Adopting document creation and communication protocols to memorialize positive investment and expansion of services can be impactful. Additionally, awareness of enforcer theories can help drive the creation of deal structures and planning documents that avoid issues in the notice or consent process. Finally, assume all deal documents could be turned over to the government during a potential deal. When it comes to deal documents, stick to the facts and ensure the data is accurate. Avoid overstating the buyer or a competitor’s position and avoid modeling price increases or suggesting an ability to raise prices to help minimize antitrust concerns.
