Mergers and Acquisitions

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California has a new regulatory review process that could have implications for healthcare mergers and acquisitions and similar transactions in the state. By way of background, after nearly two years of negotiations with state legislators, Governor Gavin Newsom signed into law healthcare omnibus bill SB 184 on June 30, 2022, which created the new Office of Health Care Affordability (OHCA). With this new law and state agency, California joins several other states, including Massachusetts, New Jersey, Oregon, Washington and Nevada in implementing oversight and funding measures geared towards healthcare cost growth targets and containment. While the goal of the law appears to be clear – monitoring and managing the costs of healthcare in California – healthcare industry stakeholders seeking to carry out applicable transactions will now need to be mindful of OHCA’s regulatory review authority.…

Continue Reading California Office of Health Care Affordability: Another Regulatory Hurdle for California Healthcare M&A Transactions?

In its December Hospital Flash Report, Kaufman Hall identified and reviewed the continued, negative impact of COVID-19 on hospital operating margins. After a dramatic drop in hospital margins during the height of the pandemic in 2020 and early 2021, hospitals experienced a fluctuation of decreasing and increasing margins in the latter-half of the year. Overall, hospital margins remain significantly narrower than they were in 2019, before the pandemic. As a result, the industry may see an increase in hospital transactions in 2022 to offset the operational and financial hardships that continue to burden the health care system, as described in greater detail below.
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Continue Reading COVID-19 Impacts and Outcomes on Hospital Margins in 2021: Increased Activity in Hospital Transactions in 2022?

As the world continues to shift and adapt to the ongoing COVID-19 pandemic, the digital health sector has experienced tremendous growth and the momentum has only accelerated in 2021.
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Continue Reading Trends in Digital Health Funding and Transactions: A Tremendous Year So Far

As we noted in our November 1, 2019 Healthcare Law Blog post, California Attorney General Xavier Becerra rejected the proposed merger between Adventist Health System/West and St. Joseph Health System (the “Proposed Merger”) in a denial letter issued on October 31, 2019. The Proposed Merger would have created a joint operating company to manage each health system’s facilities in Humboldt, Lake, Mendocino, Napa, Solano, and Sonoma Counties. In this blog post we will be discussing the Attorney General’s review process of hospital transactions and the reasons why this particular transaction may have been rejected. Moreover, we will assess what lessons can be learned going forward for other California healthcare systems and entities undergoing mergers and acquisitions in the future.
Continue Reading Adventist – St. Joseph Merger: AG Concludes Merger is Not in the Public Interest

On October 31, 2019, the California Department of Justice (“DOJ”) issued a denial letter rejecting a proposed merger between Adventist Health System/West and St. Joseph Health System. The parties had submitted notices to the DOJ requesting approval to form a joint operating company to manage the health systems’ nine health facilities in Northern California. According to the denial letter, the proposed transaction was rejected because the Attorney General concluded that it was not in the public interest due to concerns related to the potential for higher health costs and for reduced access and availability of health care services.
Continue Reading Merger of Adventist-St. Joseph Rejected by the California Attorney General

On September 7, 2018, Governor Jerry Brown signed into law Assembly Bill No. 595, A.B. 595, which amends the California Health and Safety Code to increase oversight by the California Department of Managed Health Care (“DMHC”) of health care service plan mergers and acquisitions (M&A). (See, Cal. Health & Safety Code §§1399.65 and 1399.66). The law allows DMHC to reject M&A transactions that DMHC determines will have an adverse impact on, among other things, competition, subscribers and enrollees, and the stability of the health care delivery system. In addition, DMHC will be empowered to impose conditions that it believes will protect subscribers and enrollees and the public interest as a condition of approval of the transaction (as further described below).
Continue Reading New California Law re HMO M&A

Since 2014, there has been a steady increase in mergers and acquisitions in the Rehabilitation sector, with a total of 40 deals announced in 2016.  This is almost double the number of deals in 2014 (a total of 21), and includes deals with both publicly traded corporations as well as privately held acquirers.  Similarly, after seeing a sharp decline in M&A activity in 2015, the home health and hospice sectors saw an increase of 12% in M&A activity in 2016 with a total of 57 deals announced, including several deals involving private equity investors.
Continue Reading Merger and Acquisition Activity in the Rehabilitation, Home Health and Hospice Sectors Increased in 2016, But Will this Trend Continue?

The FTC just suffered a major setback in its concerted efforts to challenge the ever growing number of consolidations in the healthcare industry, failing to secure a preliminary injunction to block a hospital merger in central Pennsylvania.  In a decisive and strongly-worded opinion, the Honorable John Jones III of the Middle District of Pennsylvania concluded that (1) the FTC had fatally alleged an unrealistically narrow geographic market; and (2) the merger was likely to benefit (not harm) consumers, in part by allowing the merged entity to remain competitive in the new healthcare environment which “virtually compels” consolidations.  Federal Trade Commission et al. v. Penn State Hershey Med. Ctr. et al., Case No. 1:15-cv-02362 (May 9, 2016, M.D. Penn).
Continue Reading FTC Suffers Setback in Campaign to Slow the Rising Tide of Healthcare Consolidations

The Massachusetts Attorney General and others are currently advocating for legislation that would accord greater legal weight to the findings of an independent state agency, the Health Policy Commission, on the effects of proposed mergers and acquisitions.[1]  Currently, a “Cost and Market Impact Review” report is referred to the Attorney General’s Office if the Health Policy Commission determines that a transaction will likely result in a provider gaining a dominant market share, higher prices for services and increased medical spending. Under the legislation, such a report would be prima facie evidence that a transaction violates the Massachusetts Consumer Protection Act and could be used in an action brought by the Attorney General to block the transaction pending the outcome of litigation.
Continue Reading State Oversight of Anticompetitive Activity in Healthcare: Is a New Wave Ahead?

In almost all corporate transactions, the first piece of written documentation the parties exchange and execute (after a non-disclosure agreement) is a letter of intent or term sheet (“LOI”), which is intended to summarize the main deal points. And as many corporate transactions involve entities organized in Delaware, these documents often select Delaware as the governing law.
Continue Reading When Is a Non-Binding Term Sheet or Letter of Intent Enforced as a Binding Contract?