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John Chesley, a health care partner, discusses M&A deal-making in the industry and the impact of value-based payment models. He also outlines a new Bloomberg BNA portfolio on M&A transactions that he co-authored.
Health care M&A transactions are subject to the larger industries’ ups and downs – and winners and losers, of course, are a shift from one sector to another over time depending on external pressures, particularly the payment system pressures. The value-based health care transition that’s taking place and will continue for a number of years will have some significant impacts on health care M&A generally – it will make certain sectors much more desirable than others. Physician practice management, for example, is an area that has been hot and will continue to be so because of the importance of creating economies of scale and creating access to capital for individual physicians aggregated together under management agreements through management service organizations – so that’s a hot area and a ripe one for investment. In terms of winners, another sector that looks hot at this point would be subacute providers because of their essential role in taking care of a patient who is covered by a bundled payment or an episodic payment model. They have a unique and important role to play in catching that patient on his or her way out of an acute care hospital into less intensive settings for further services and healing.
Health care mergers & acquisitions practice is unique among the M&A activities of lawyers and law firms for a number of reasons. Probably the most significant being how embedded in community benefit and common good the nature of most health care services is – it’s an enterprise that’s there to make people well and to help them through the most difficult parts of their physical lives and to improve the health and welfare of communities generally. So it brings with it, particularly in non-profit M&A, a sense of mission. And on the for-profit side, it brings with it a sense of responsibility. The challenges are largely regulatory and involved with the interesting problems of community-based governance in health care M&A, and they bring forward again, that human-side of the enterprise that fits together with deal making, knowhow and savvy.
Two partners of mine, Brett Friedman, Michael Lampert and I are the co-authors of the new portfolio published by "Bloomberg BNA: “Health Care Mergers and Acquisitions,” and it’s a soup to nuts treatise to take a practitioner through the process of a health care transaction. It starts with basics – laying out, even before the transaction begins, things to be thinking about, who the participants are, coordinate the role of counsel, and coordinating other actors in the process. It moves to letters of intent, term sheets, due diligence – it covers in great detail a typical set of transaction documents and accompanied by forms annotated with notes for practitioners to use. Brings us all the way through pre-closing and closing phases and then to post-closing matters. So it’s the complete chronology of a deal from gleam, to conclusion and beyond. And it serves a health care practitioner particularly, by pointing out along the way, regulatory and industry issues that are sure to pop-up.