Case Studies

Epstein Becker Green Closes $152 Million Sale of Health Care System

Epstein Becker Green attorneys successfully closed the sale of client Moses Taylor Health Care System, a hospital system based in Scranton, Pennsylvania, to Community Health Systems, Inc., one of the nation's largest for-profit hospital systems. The sale became effective on January 1, 2012. CHS agreed to pay the sale price of $152 million and commit to, among other things, invest at least $60 million in Moses Taylor's operations.

Epstein Becker Green acted as transaction, regulatory, and antitrust counsel.

The Epstein Becker Green team was led by Doug Hastings and Dale C. Van Demark and included George B. Breen; Michelle Capezza; Jason B. Caron; Tanya Vanderbilt Cramer; Ross K. Friedberg; J. Andrew Lemons; Stephanie G. Lerman; Katherine R. Lofft; Julia E. Loyd; Kara M. Maciel; David E. Matyas; Colin G. McCulloch; Jonah D. Retzinger; Tamar R. Rosenberg; Joel C. Rush; Jordan B. Schwartz; Patricia M. Wagner; Dawn R. Helak; and Alan B. Wynne.

Epstein Becker Green Successfully Represents Industry in Halting Anticompetitive Regulation Proposals in Texas

Attorneys from the Antitrust Counseling and Defense practice at Epstein Becker Green (“EBG”) recently coordinated with the Federal Trade Commission (“FTC”) to help an industry client block anti-competitive state board regulations.The client,a holding company that operates dental service practices, opposed regulations proposed by the Texas State Board of Dental Examiners that would have restricted dentists’ ability to contract with dental service organizations (“DSOs”) and ultimately hamper business competition.

The Texas board, largely composed of individual practitioners appointed by the governor of Texas, attempted to promulgate several regulations that would have imposed new restrictions on a dentist’s ability to enter into arrangements with DSOs for administrative and non-clinical services. This threat engendered a massive DSO industry response, as the regulatory effort imperiled the operations of scores of interstate businesses. EBG was among a number of law firms, lobbying firms, and public relations firms that were commissioned to thwart the effort.

While the Texas board’s proposals were in contention, the Supreme Court of the United States was hearing arguments in a very similar case brought by the FTC against the North Carolina State Board of Dental Examiners. The FTC alleges that the North Carolina board’s exclusive regulation is an anticompetitive effort that violates federal antitrust laws.

Noting this, the Antitrust Counseling and Defense practice at EBG consulted regularly with North Carolina counsel and the FTC and successfully prompted the FTC to make a submission in the Texas rulemaking proceeding, condemning the proposed regulations there. FTC staff, in response to a notice requesting public comments, urged the Texas board to reject two proposed rules that impose new restrictions on the ability of Texas dentists to enter into contracts with non-dentists, including DSOs, for the provision of nonclinical, administrative services.

The FTC comment, submitted by staff of the FTC’s Office of Policy Planning, Bureau of Competition, and Bureau of Economics, on October 6, 2014, stated that the rules (proposed 22 Tex. Admin. Code § 108.70 and § 108.74) seemed likely to discourage dentists from affiliating with DSOs by mandating that dentists assume responsibility for the types of functions that DSOs typically provide and by expanding the Texas board’s authority to take disciplinary action against dentists who enter into these prohibited agreements. By contrast, under the current regulations, such service agreements for many business functions—such as accounting and bookkeeping—are presumed not to violate the Texas Dental Practice Act. The comment explains that such restrictions may reduce competition, likely resulting in higher prices and reduced access to dental services, especially for underserved populations. The FTC’s comment is part of ongoing efforts to promote competition in the health care sector, which benefits consumers through lower costs, better care, and more innovation. As the FTC stated:

We have consistently maintained that the choice of business model is an important dimension of the competitive process that should not be restricted by regulation or private agreement but based on reliable evidence that regulation is reasonably necessary to achieve an important public purpose.

On November 21, 2014, the Texas board withdrew the regulatory proposals. EBG’s leadership position in this effort ultimately saved the day for its clients and others in the DSO industry.

The EBG team included Stuart M. Gerson and Patricia M. Wagner.

Reducing the Cost of Hospital Care

At a time of continued employer, insurance, and governmental market evolution and uncertainty, health systems face myriad challenges, as well as opportunities. Many are finding that a larger scale is required in order to meet the access, affordability, and quality needs of a growing consumer population, as well as the investment required to support those needs.
 
Epstein Becker Green has been using its deep understanding of the rapidly changing health care industry to assist clients as they navigate those crucial challenges and opportunities. For example, the firm recently provided structuring and governance advice, assisted with a due diligence review, and supplied antitrust analysis and tax support in a transaction involving the combination of two hospital systems. Epstein Becker Green was also integrally involved in drafting the principal transaction documents and in helping the clients satisfy key regulatory requirements.

As a result of this combination, the parties are taking advantage of their strengths and proven track record in clinical integration and population health to reduce health care costs while delivering high-quality and high-value care to the residents they serve.