The Latest: Health Care Transactions Will Require Advance Notice to Washington State AG

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What Happened:

  • On May 7, 2019, Governor Jay Inslee of Washington State signed House Bill 1607 into law. The law goes into effect for transactions closing after January 1, 2020, and requires advance notice to the Washington Attorney General (AG) of certain transactions 60 days in advance of closing the transaction. The intent of the law is “to ensure that competition beneficial to consumers in health care markets across Washington remains vigorous and robust[.]”
  • Parties must file written notice with the AG for any deal that involves two or more hospitals, hospital systems, or other provider organizations that represent seven or more health care providers in contracting with insurance companies or third-party administrators. A “provider” includes a physician, nurse, medical assistant, therapist, midwife, athletic trainer, home care aide, massage therapist, among others.
    • The law can apply to transactions involving very small medical groups, as long as there are seven providers who contract with insurance providers. The law can also apply to transactions with non-Washington parties if the out-of-state party generates $10 million or more in revenue from Washington patients.
  • Given the relatively low thresholds for an AG filing, this law would require notifications for transactions that are not reportable under the Hart-Scott-Rodino Act (HSR Act), as well as those that are reportable under the HSR Act.
    • If a transaction is HSR reportable, the parties must submit their HSR filing to the AG.
    • If a transaction is not HSR reportable, parties must submit the following information in writing to the AG:
      • The names and addresses of the parties;
      • The locations where health care services are provided by each party;
      • A brief description of the nature and purpose of the proposed transaction; and
      • The anticipated effective date of the transaction.
    • The notification requirement applies to mergers, acquisitions and contracting affiliations. A contracting affiliation is a “formation of a relationship between two or more entities that permits the entities to negotiate jointly with carriers or third-party administrators over rates for professional medical services” but does not include arrangements among entities under common ownership.
    • The penalty for noncompliance is $200 per day.
    • The AG has 30 days from the date of notice to submit a request to the parties for additional information. If the AG has antitrust concerns, it may serve a civil investigative demand to investigate.

What this Means:

  • Parties to health care transactions must now consider this Washington law’s notice requirements for any transactions that close after January 1, 2020. Parties may have reporting obligations even if the deal is not reportable under the HSR Act.
  • The 60-day notice required by the law may affect the ability of a transaction to close. A transaction could receive HSR approval after the 30-day HSR waiting period, but still be constrained by the 60-day period required in the law. Alternatively, parties with HSR-reportable transactions could prepare their HSR filing early to attempt to have the HSR waiting period and the law’s waiting period end concurrently. Either way, this additional timing must be taken into account in a transaction’s timeline.
  • Finally, a $200-per-day penalty is a small fee compared to the significant daily penalties associated with noncompliance under the HSR Act, but the fee could become significant if allowed to gather over a year or years.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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