Reviews that shape the timeline
Hospital mergers and acquisitions above federal size thresholds require a premerger filing with the FTC and the Department of Justice, and the FTC has a long record of challenging hospital combinations it views as reducing competition in a local market. In New York, a change in the ownership or control of a hospital generally requires approval through the state's health planning process, and related deals outside that review, such as with physician groups or management companies, can require separate advance notice to the Department of Health. Nonprofit hospitals add another layer, since a nonprofit corporation's sale of all or substantially all of its assets can require the involvement of the Attorney General or a court. Medicare and Medicaid enrollment, licenses, and accreditation also have to transfer or be reissued properly. Each review runs on its own schedule, and the slowest one tends to set the closing date.
Diligence particular to hospitals
Beyond the usual corporate and financial review, buyers in this sector look closely at billing practices, physician arrangements, and compliance with federal fraud and abuse laws, since liabilities in those areas can follow the hospital into new ownership. Medical staff bylaws, physician employment agreements, and collective bargaining agreements may contain terms triggered by a change of control. Payer contracts may require consent or be reopened for negotiation. Charity care obligations, tax-exempt bond financing, and commitments made to the state in earlier approvals also need to be identified. A seller that organizes these records before marketing the deal usually moves faster and negotiates from a firmer position.
Questions settled at the planning stage
Early in a hospital transaction we look at the structure being considered, whether a full merger, a change in the corporate member, a joint venture, or an asset sale, and how each changes the approvals required. We identify the regulators involved and the order in which filings should be made. We also talk about communication with employees, medical staff, and the community, which can affect how regulators and the public receive the deal. Known compliance issues deserve a plan of their own, including whether any should be addressed before signing. What comes out of this stage is a realistic timeline that everyone on the board understands.
