Thinking of Selling or Buying a Medical Practice? New Antitrust Legislation May Add a Speed Bump

The Florida Bar Health Law Updates

Florida has been at the forefront of some very interesting healthcare mergers and acquisitions activity in the past year, including an influx of private equity, payor acquisition of provider groups, and consistent growth in not-for-profit vertical integration acquisitions. However, waves of reform are underway. If the Florida House gets its way, the pace of healthcare transactions in Florida may hit a speed bump.

The Florida House’s bipartisan momentum takes direct aim to slow provider consolidation in the State. 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 palpable commitment to these values 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 being introduced, sends a strong signal that the Florida legislature is committed to ensuring antitrust law is followed and enforced in Florida hospital physician transactions.

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”[i] to another group practice of four or more physicians, the group practice, hospital, or hospital system to provide written notice to the Florida Office of Attorney General (“OAG”) 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 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.[ii]

HB1243 is designed to provide the Florida OAG 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”).

Under HSR, parties entering into certain multi-million dollar transactions must file a notification and report form with the Federal Trade Commission and Assistant Attorney General of the Department of Justice, and wait a certain period (typically, 30 days) during which time the regulatory agencies may request further information to help them assess whether the proposed transaction violates the antitrust laws of the United States or could cause an anti-competitive effect in the parties’ markets. HB1243 would impose reporting and notification requirements on parties that would otherwise not have been affected by HSR and force a longer waiting period (90 days) upon parties that will simultaneously be required under federal law to file notice and reporting under HSR.

If enacted into law, HB 1243 will significantly affect all parties contemplating entering into health care transactions in Florida and may influence potential health care investor interest in the State of Florida.  Businesses contemplating entering into a health care transaction in Florida, will need to consider whether to expedite acquisitions, sales, and physician exit strategies before the Bill’s likely chilling effect on investor interest and unavoidable pre-transaction waiting period. While the Bill may not pass before the legislative session adjourns (Friday, May 3, 2019), the House’s commitment to health care transformation cannot be understated.

Reprinted by permission of The Florida Bar Health Law Updates.

ENDNOTES

[i] “Material change” is defined as: “(i) a merger, consolidation, or affiliation; (ii) the employment of all or substantially all of the physicians of a group practice; or (iii) the acquisition of all or substantially all of: (a) the properties and assets of a group practice; (b) the capital stock, membership interests, or other equity interests of a group practice; or (c) one or more insolvent group practices.”

[ii] Specifically, restrictive covenants entered into with physicians who practice a medical specialty in a county where one entity employs or contracts with, either directly or through related or affiliated entities, all restrictive covenants entered into with physicians who practice such specialty in that county would be void and unenforceable until three years after another entity enters the market and begins offering the medical specialty to the patients of that county.