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Thinking of Selling or Buying a Florida Medical Practice or Hospital? Be Advised, Pending Antitrust Legislation Proposes to Add a Speed Bump

Florida has been at the forefront of some very interesting healthcare M&A activity in the past year, including an influx of private equity and consistent growth in Hospital and Health Plan vertical integration.  Unless subject to antitrust filing requirements, these high profile transactions are typically carried out under veils of confidentiality and announced upon completion.  However, Florida M&A is not insulated from recent Florida House health reform initiatives.  If the Florida House gets its way, the pace of healthcare transactions in Florida may hit a speed bump in the form of a notice, delay and potential for a pre-close assessment by the Florida Attorney General.

The Florida House activity in the health care space cannot be understated.  In a striking video, the Florida House promises the 2019 legislative session will bring “more affordab[ility], more choices, more practitioners, more access, more quality, and more value” to the State’s health care market. In the video, the Florida House promises to end “government protection for hospital monopolies” and increase “enforcement against providers who violate antitrust laws.”

On April 11, 2019 the Florida House demonstrated its bipartisan commitment to increase visibility of provider consolidation activities in the State by unanimously voting to pass Florida House Bill 1243 (“HB 1243” or “Bill”) sponsored by Rep. Colleen Burton (R). The Bill’s unanimous passage, only a month after introduction, sends a strong signal that the Florida House is committed to more transparency for certain Florida healthcare transactions and providing a “waiting period” to ensure antitrust law is followed and enforced.  The Bill was forwarded to the Senate, and we will be closely monitoring how the Senate responds to this initiative.

If enacted into law, HB 1243 would require each party of any transaction involving a group practice, hospital, or hospital system that results in a material change to another group practice of four or more physicians, hospital, or hospital system to provide written notice to the Florida Office of Attorney General (“AG”) at least 90 days before the effective date of such a transaction. A party’s failure to provide proper written notice would subject such entity to sizable potential civil penalties of up to $500,000.00.  Additionally, in counties where there is only one entity contracting with or employing any category of medical specialists, such entity’s restrictive covenants would be void and unenforceable until there is new market entry by a competitor entity for at least three years.

HB1243 is designed to provide the Florida AG with an opportunity to scrutinize hospital and group practice health care transactions of all sizes, including transactions that might not otherwise have required a federal pre-merger notification, filing, and review under the Federal Hart-Scott-Rodino Act (“HSR”).   Because the proposed waiting period of ninety days is longer than that required under HSR, it may delay transactions already covered under HSR.

If HB1243 is enacted, health care buyers and sellers will need to be aware of the impact on their plans to buy, sell, and operationalize health care transactions in Florida.  This would add an additional layer of regulatory submissions to the AHCA approvals already on the radar of private equity investors. While the Bill may not pass before the Senate’s legislative session adjourns on May 3rd, we are closely monitoring the political climate around health care.

Businesses should carefully evaluate their acquisition pipeline and growth strategies in light of the bipartisan support for HB1243.  This issue has momentum and, if not passed in this session, is likely to resurrect in future sessions. We recommend that physicians closely evaluate the timing of any exit strategy, taking into account the risk of an M&A slowdown caused by new regulatory requirements. Businesses should carefully consider whether to expedite acquisitions and other material business transformations before the Bill’s likely chilling effect on investor interest due to the pre-transaction waiting period and increased regulatory scrutiny.

©2019 Epstein Becker & Green, P.C. All rights reserved.

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About this Author

Kathleen M. Premo, healthcare lawyer, Epstein Becker
Member of the Firm

KATHLEEN M. PREMO is a Member of the Firm in the Health Care and Life Sciences practice, in the St. Petersburg office of Epstein Becker Green. For more than 20 years, she has served as a legal and strategic advisor for a diverse range of health care and business clients, including Fortune 500 companies, hospital and health systems, Medicare Advantage provider groups, and entrepreneurial privately held companies.  Ms. Premo’s clients appreciate her sophisticated business acumen and insightful, real-world legal counseling, honed while serving as a legal advisor, strategist,...

727-362-6144
Elizabeth Scarola Health Care Attorney
Associate

ELIZABETH SCAROLA is an Associate in the Health Care and Life Sciences practice, in the St. Petersburg office of Epstein Becker Green. She brings an insider’s perspective to her health care practice. In addition to her work on strategic, operational, and legal projects for a large, statewide clinically integrated network of hospitals and providers, she has hands-on scientific research experience. Ms. Scarola has conducted independent research in pediatric endocrinology and contributed to such publications as the Journal of the American Medical Association and The New England Journal of Medicine. Her background gives her a deep understanding of health policy, the Affordable Care Act, value-based reimbursement, population health, and translational research.

Ms. Scarola helps health care clients navigate the complexity of implementing strategic and operational initiatives in today’s complex regulatory environment. Her services include:

  • Advising hospital, provider, pharmaceutical, and medical device manufacturer clients on such federal and state regulatory matters as the Anti-Kickback Statute, self-referral laws, HIPAA compliance, and federal and private payor issues (including bundled payments) and risk-based contracting

  • Guiding clients through strategic affiliations and transactions, including mergers, acquisitions, joint ventures, and contract negotiations

  • Drafting and negotiating various contracts, including asset purchase agreements, joint venture agreements, vendor agreements, physician recruitment agreements, physician employment agreements, and medical director agreements

  • Negotiating clinical trial agreements on behalf of hospitals

  • Counseling clients on corporate governance and compliance matters

Before joining Epstein Becker Green, Ms. Scarola was an attorney in the Health Care practice group of a national law firm. Prior to that, she was an instructor for an undergraduate course on health care policy, medical ethics, patient safety, and the Affordable Care Act at the University of Michigan. She holds a Master in Medical Science degree from Boston University School of Medicine and a Master of Health Services Administration from the University of Michigan.

In addition to her work at a large clinically integrated network of hospitals and providers in Michigan, Ms. Scarola served as a Legal Extern in the Offices of Corporate Counsel for a national, not-for-profit Catholic health system based in Michigan and an academic medical center in Indiana, where she analyzed a variety of litigation and transactional issues in collaboration with General Counsel. She also externed at a not-for-profit, specialty hospital in Indiana, where she assisted the hospital in enrolling in the state’s Medicaid waiver program.

Ms. Scarola also has been involved in a variety of volunteer initiatives. She is passionate about her work as a Director of Seeds of Hope for La Victoria, Inc., a nonprofit that provides medical assistance to residents of La Victoria, Dominican Republic. She has been involved with the nonprofit since its founding, traveling to the area over 10 times, as well as leading others on medical mission trips to the region.

727-551-4356