Over the past six weeks, Florida’s House of Representatives introduced and passed a bill that could change the process and time needed for certain healthcare transactions. Here are five things dealmakers need to know about this new bill, which could soon become law and impact those completing healthcare transactions in Florida.
What Does the Bill Require? The bill that passed the Florida House requires that hospitals, group practices with four or more physicians, and hospital systems provide the state attorney general with written notice of various forms of acquisitions or mergers — each referred to as a “material change” — affecting such hospitals, hospital systems or practices. Any such notice of a “material change” must include certain prescribed information, such as a “description of the proposed relationship” among those in the proposed merger or acquisition, the specialty of the physicians involved, and the office locations where services will be provided. Unlike the Hart-Scott-Rodino (HSR) Act, HB 1243 does not include a dollar threshold for this notice.
The Timeframe. The timeframe in which this required notice must be sent to the attorney general is significant. The bill that passed the House requires notice at least 90 days prior to the proposed closing of a transaction. This waiting period for the involved parties is longer than typical waiting periods triggered by federal antitrust law, and will apply to a much broader set of transactions. For example, when parties notify the Federal Trade Commission and Department of Justice of a proposed merger or acquisition under the HSR Act, most transactions are allowed to close within 30 days of the notification. Under this 90-day mandate, Florida’s attorney general could make parties involved in a potential transaction wait much longer than they now typically do. Notably, unlike the HSR Act, the bill does not currently contemplate any “early termination” or expedited processing for transactions that obviously present no potential anti-competitive concerns.
Proposed Penalties. Any hospital, hospital system or practice that fails to timely provide the attorney general with the prescribed 90-day notice could be subject to a fine of up to $500,000. This is clearly a significant penalty and conveys just how serious the Florida House views this requirement. If HB 1243 becomes law, the Florida healthcare community will have to monitor how aggressively the Attorney General’s Office enforces the law and what guidance it gives healthcare providers, such as any flexibility around the notice timeline.
Where in the Process Is HB 1243? HB 1243 initially was filed March 3, 2019. Just over a month later, on April 11, the bill passed the House with a resounding 115 affirmations (with none opposed). While the Senate still has to pass the bill, it is moving quite quickly and is not seeing much, if any, opposition. For example, we understand that state medical associations have taken a neutral stance on the bill.
HB 1243 Is Unique. While dealmakers are well aware of the lead time associated with the federal government’s need to review transactions of a certain size to address any potential anti-competitive effects, for Florida-based healthcare groups, HB 1243 is different and casts a wider net. We are unaware of any other state law that imposes a notification or waiting period requirement to facilitate an antitrust investigation of a merger or acquisition by the state attorney general. While some states have laws that require notification when healthcare mergers involve the acquisition of a nonprofit, these statutes do not appear tailored to the apparent antitrust concerns of the Florida legislature and do not carry the significant waiting period of HB 1243.
Overall, this bill would bring big changes to the healthcare transactional landscape in Florida, if it becomes law. If enacted, HB 1243 will necessitate additional planning in healthcare transactions and may influence investor interest in the state. Further, other states may elect to follow suit, either because of similar antitrust concerns or out of an interest in regulating and/or monitoring transactions more generally. If the bill is implemented, the Florida Attorney General’s Office will generate a robust database of hospitals, hospital systems and group practices that have participated in a “material change.” While, on its face, the thrust of the bill appears aimed at antitrust oversight, such readily accessible information could result in increased scrutiny for constituents to a “material change.” Although this potential move by Florida is unusual, the reality is that most states have some unique elements in the transaction pathway, and dealmakers who are savvy about these nuances should be able to successfully structure their deals accordingly with hopefully minimal disruption.
Anyone interested in influencing this legislation is encouraged to contact the authors promptly. There may be little time to affect this legislation.