An increasing number of states are scrutinizing healthcare transactions by enacting statutes that require advance notice of pending practice sales be given to state authorities prior to deal closing. Covered transactions include both practice asset and equity sales. These notice requirements can also prohibit closing a covered healthcare transaction until a specified waiting period has passed. Overall, given the high applicable thresholds, the intent of these statutes seems focused on private equity investments in the healthcare space. However, depending on applicable state requirements, many transactions not involving private equity investments can still be subject to the notice requirements.
States that currently have some form of required healthcare transaction notice include:
· California
· Colorado
· Connecticut
· Hawaii
· Illinois
· Indiana
· Maine
· Massachusetts
· Minnesota
· Nevada
· New Jersey
· New Mexico
· New York
· North Carolina
· Oregon
· Rhode Island
· Vermont
· Washington
Several other states, including Texas, have legislation pending that would, if passed by state governments, impose similar notice requirements for healthcare transactions in those states.
While typically not giving state authorities per se consent rights over pending healthcare transactions, these notice requirements can significantly impact the timing of certain transactions due to advance notice filing requirements of between 30 and 180 days prior to the closing of the sale of a healthcare business. As a result, parties to a healthcare practice sale must determine early in the sale process whether notice is required and, if so, complete and timely file the applicable notice.
Individual state requirements of what constitutes a healthcare transaction subject to a notice requirement vary state-to-state, with some statutes only applying to hospitals, while others apply to a broad spectrum of healthcare entities generally. In addition, most of these statutory notice requirements have some threshold practice revenue or transaction sale price that must be met before notice is required to be given. While these thresholds are typically relatively high in dollar amount, many quality healthcare practices being sold will fall subject to these state-level notice requirements.
Finally, penalties for failure to comply with current statutory notice requirements related to pending healthcare transactions also vary. In some states, there are no or very nominal penalties, while in other states significant per-day dollar amount penalties can be imposed for failure to comply.
If you are considering acquiring the assets or business of a healthcare practice in any of the states that currently have transaction notice requirements, or that have pending legislation that could become effective prior to deal closing, it is important that the notice requirements be evaluated well in advance of the target closing date. Then, if necessary, proper notice must be filed with the applicable state authority. Otherwise, significant penalties could be imposed, and last-minute delays could arise, potentially jeopardizing closing.
Parsons’ attorneys are qualified to assist clients in a wide range of healthcare issues, including compliance with state-specific healthcare transaction notice requirements discussed above. Please reach out and let us know how we can assist you in your healthcare transaction and regulatory needs.
