Health Law Advisor

From our Thought Leaders in Health Law video series: In today's complex and rapidly evolving health care landscape, navigating the path of expanding or selling a business requires a nuanced understanding of the intricate state and federal regulatory frameworks.

With states increasingly imposing legislative oversight to safeguard competition, care access, and quality, it's crucial for health care providers, private equity firms, and management organizations to have a strategic partner adept at handling these challenges.

States are imposing prior approval or prior review legislation to allow for more visibility regarding proposed transactions. Much of the legislation seeks to increase oversight of health care entity relationships with management companies and private equity firms.

What does this mean for you?

Due diligence is a standard phase of any corporate transaction, whether structured as an asset or stock sale or joint venture, and sellers are often surprised, and even overwhelmed, by the comprehensiveness of the diligence investigation.  Preparing prior to soliciting bids or looking for a buyer can ease the burden of diligence and allow the seller to focus on other areas of the transaction, such as negotiating important terms and documents.

New York recently enacted new legislation that will amend Article 45-A of the New York Public Health Law, entitled “Disclosure of Material Transactions”.  Although the legislation, as enacted, contains no description of legislative intent, the budget bill language originally proposed referenced concerns with the “proliferation of large physician practices being managed by entities that are investor-backed” (e.g., private equity platforms) and which are otherwise unregulated by the state outside of the licensure of the individual practitioners.

Effective August 1, 2023, the new legislation requires thirty (30) days advance notice to the New York State Department of Health (“Department”) of any “material transactions” involving “health care entities” that provide administrative or management services for physician practices, provider-sponsored organizations, health insurance plans, “or any other kind of health care facility, organization, or plan providing health care services. . . .”   

In this episode of the Diagnosing Health Care Podcast:  The Federal Reserve’s steady increase of interest rates and the slowed economic growth have increased fiscal pressure on health care providers, leaving many to look for ways to bridge budget shortfalls through injections of capital, asset sales, or other strategic transactions. 

What options are there for providers moving forward?

The pace of health care transactions is robust, purchase price multiples are increasing, and many health care businesses are taking advantage of a sellers’ market.  Recently, our clients have increasingly turned to representation and warranty (“R&W”) insurance, finding a market more amenable to the nuances of health care deals than in the past. In the right deal, R&W insurance can limit risk to both seller and buyer and increase value to a seller by allowing for “walk-away” or “naked” deals.  R&W insurance may also be used as a tool by a buyer to increase the ...