Under new Connecticut healthcare legislation, which took effect October 1, 2014, parties to transactions that result in a "material change to the business or corporate structure of a group practice" are required to notify the Connecticut Attorney General's office at least thirty days prior to completing the transaction ("Notice of Material Change"). The legislation does not employ transaction value thresholds the way federal Hart-Scott-Rodino notification requirements do, but rather targets transactions resulting in practice groups of eight or more physicians, along with hospital or hospital system acquisitions of practice groups. The notification allows the AG to consider the competitive effects of the notified transactions in advance of closing. The relatively modest size of the resulting practice group triggering the notification requirement appears to be aimed at more localized transactions that would likely not otherwise be reviewed by the federal antitrust agencies.
Specifically, the types of practice group transactions that fall within the notification requirement include the affiliation with or acquisition of a practice group with another practice group that results in a practice of eight or more physicians; or the affiliation with or acquisition of a practice group with any hospital, hospital system, captive professional entity, medical foundation or other entity organized or controlled by a hospital or hospital system. The notification requirement also extends to the employment of all or substantially all of the physicians of a practice group by another practice that results in a practice group of eight or more physicians; or employment of all or substantially all of the physicians of a practice group by a hospital, hospital system, captive professional entity, medical foundation or other entity organized by, controlled by or otherwise affiliated with a hospital or hospital system.
The Notice of Material Change requires, among other things, the parties to provide a narrative description of the nature of their proposed relationship and of the transaction; identification of the physicians who will practice with the resulting organization and information relating to the business entities that will provide services following the transaction, including the primary service area for each service location. The parties are encouraged, but not required, to also provide the agreement effectuating the transaction. The legislation also provides that the information submitted to the Attorney General will be maintained in confidence and is exempt from the Connecticut Freedom of Information Act.
As the healthcare landscape continues to shift, the Connecticut legislation represents another example of states' continuing efforts to regulate competition with respect to healthcare services provided within their own borders. In August, the NYS Department of Health followed North Carolina and published proposed regulations to implement a Certificate of Public Advantage, or "COPA", process aimed at improving healthcare quality and outcomes in that state. The NYS COPA process will provide a framework for the review and supervision of cooperative and collaborative arrangements such as mergers and acquisitions among healthcare providers. For healthcare providers, the COPA process can offer immunity on a fairly broad range of activities, from clinical integration programs to joint ventures to full scale mergers which can include, for instance, the sharing, allocation, or referral of patients or personnel.
While it remains to be seen whether the Connecticut legislation will lead to aggressive antitrust reviews of what otherwise would be fairly routine, smaller-scale practice group tie-ups, it will at the very least require careful consideration of the antitrust issues presented by those transactions before presenting them to the AG. Proskauer's healthcare and antitrust practice group lawyers routinely handle the types of transactions and analyses implicated by the new legislation in Connecticut and New York.