Overview

As the health care industry becomes more integrated and competitive, institutions need to maximize the efficiency and delivery of their services.

Ropes & Gray lawyers help hospitals, academic medical centers, research institutions and universities find the right partners. We are experienced in mergers and acquisitions, affiliations, joint ventures and disaffiliations with hospitals, physicians, major pharmaceutical companies, pharmacy benefit managers, health industry software companies, senior living companies, and medical device manufacturers. Our lawyers have both transactional experience and industry knowledge, so they can provide clients with a comprehensive approach to a range of health care transactions.

Our services include:

Advising nonprofit clients contemplating joint ventures with or disaffiliation from for-profit entities about how to preserve the nonprofit organization’s tax-exempt status
Navigation of the complicated issues that a major transaction may trigger, in the areas of taxation, antitrust, bond financing, labor and employment and real estate
Counseling clients about the issues surrounding conversion form a non-profit to for-profit status
Creations of mergers, acquisitions and divestitures of health care systems, obligated bond groups, and other affiliated entities

As the health care industry becomes more vertically and horizontally integrated, Ropes & Gray lawyers work with health care organizations to manage change. We advise clients about evolving regulatory issues and help academic medical centers, tertiary care hospitals and medical schools collaborate with physicians and faculty members to maximize efficiency and delivery of care.

We can help clients with:

Incorporation of physician professional services into their delivery systems for the purpose of joint managed care contracting
Bridging the academic and clinical expectations inherent in faculty practice plan arrangements
Acquisitions of hospital, physician practice, and other providers

Experience

Mergers & Acquisitions

University of Southern California’s Acquisition of Two Tenet Hospitals: We represented the University of Southern California in connection with the healthcare regulatory, tax, employee benefits and environmental aspects of its $275 million acquisition of USC University Hospital and USC Norris Cancer Hospital from Tenet Healthcare Corporation.
Stanford University and UCSF Merger: We represented Stanford University in connection with the consolidation of Stanford University Hospital, Lucile Salter Packard Children’s Hospital, UCSF Medical Center and the related faculty practice plan operations of Stanford University and the University of California, San Francisco to form UCSF-Stanford Health Care.

Affiliations & System Consolidations

West Penn Allegheny Health System/Highmark: As lead transaction counsel, we are representing West Penn Allegheny Health System, a multi-hospital nonprofit system headquartered in Pittsburgh, Pennsylvania, in the pending affiliation with Highmark, the largest Blue Cross-Blue Shield insurer in Pennsylvania, West Virginia, Maryland and Delaware. The affiliation would result in the creation of an insurer/provider health care delivery and financing system described in cover articles in Modern Healthcare and the Wall Street Journal as a national health care “game changer.”
Milton Hospital/Beth Israel Deaconess Medical Center: We represented Milton Hospital, a community hospital that has operated independently for over 100 years, in its corporate affiliation with Beth Israel Deaconess Medical Center (BIDMC).
Lahey Clinic—Northeast Affiliation: We recently represented Lahey Clinic (“Lahey”), a teaching hospital of Tufts University School of Medicine, in its affiliation with Northeast Health System (“Northeast”) to create Lahey Health System, a new integrated health care delivery system serving northeastern Massachusetts.

Separations & Unwinds / “Disaffiliations”

Joint Ventures & Partnerships

Conversions

Advising a tax-exempt Midwestern health maintenance organization on its options in the sale of its operation to a newly formed for-profit corporation and on the likely tax consequences of the proposed transaction.
Represented a large for-profit physician practice in Milwaukee area when it was acquired by the largest nonprofit hospital system in Wisconsin.
Represented The George Washington University in the sale of The George Washington University Hospital to District Hospital Partners, L.P., a limited partnership comprising The George Washington University and Universal Health Services.
Represented MetroWest Medical Center, a two-campus hospital in Boston’s western suburbs, in its negotiations with proprietary giant Columbia/HCA.

Private Equity Investments

Represented US Anesthesia Partners, a Welsh, Carson, Anderson & Stowe portfolio company, in its add-on acquisition of Greater Houston Anesthesiology, a provider of anesthesia and perioperative services for medical facilities in Houston and surrounding communities.
Represented Welsh, Carson, Anderson & Stowe in its acquisition of GetWellNetwork Inc., a provider of interactive patient care solutions for hospitals in the United States.
Represented the Blackstone Group in its $3 billion acquisition of Emdeon Inc.
Represented KRG Capital and Bain Capital Ventures in the sale of Liberty Dialysis Holdings Inc to Fresenius Medical Care AG & Co. KGAA for $1.7 billion.
Represented US Oncology Inc., a portfolio company of Welsh, Carson, Anderson & Stowe, in its $2.1 billion sale to McKesson Corporation.
Represented Liberty Dialysis, LLC and Bain Capital in the $550 million sale of Liberty Dialysis to KRG.

Navigating Emerging State Regulation

The shift to value-based care models has at its core a need to manage population health using large and diverse clinical settings, access to data and technology to manage care, and assumption of financial risk leading to horizontal and vertical integration. Aggressive federal and state enforcement of antitrust and other competition laws appear to be in tension with this movement. In particular, the adoption of new state competition, quality, access and cost laws is creating additional burdens on health care entities—including private equity-backed entities and management services organizations—considering new transactions. These new laws and regulations are highlighted below and discussed in greater detail in our podcast series, which also address ways to mitigate their impact. Many of these laws are rooted in the Model Act.

These laws require the review of health care transactions that historically fell outside of review by the states under existing facility licensure, certificate of need, non-profit and insurance laws.
* See additional failed legislation below.
This page was last updated on October 17, 2023. While we will endeavor to keep this page up to date with the most recent changes in state regulation of health care transactions, we note that this is a rapidly evolving area, and our map may not in real time capture the latest legislative and regulatory updates.

Legislation

Illinois: Beginning January 1, 2024, Illinois will require health care facilities and provider organizations to provide 30-day pre-closing notice to the state Attorney General’s Office of any merger, acquisition or contracting affiliation. Illinois’ review process applies to all applicable in-state entities, and out-of-state entities with sufficient patient revenue in Illinois. While transaction “approval” is not explicitly required, the Attorney General has discretion to open an investigation and challenge conduct the Attorney General deems anti-competitive.
Minnesota: Beginning May 27, 2023, health care entities formed or licensed in the state of Minnesota with average annual revenue of $80 million or more must provide 60-day pre-closing notice to the state Attorney General’s Office and Commissioner of Health for covered transactions, which includes mergers, transfers of ownership and the creation of new health care entities. See HF 402. The Attorney General has authority to commence an action blocking or unwinding the transaction if determined necessary to protect the public interest. Additionally, beginning January 1, 2024, health care entities with average annual revenue between $10 million and $80 million must submit notice to the Commissioner of Health of covered transactions 30 days pre-closing (or within 10 business days of the date the parties reasonably anticipated entering into the transaction). The Commissioner of Health will use this data to analyze the impact of transactions in Minnesota on cost, quality, and access to health care.
Rhode Island: Under the Hospital Conversions Act, transfers of at least 20% of ownership or control of a hospital in Rhode Island require approval by both the Department of Health (“DOH”) and the Attorney General (“AG”). The law captures both for-profit and not-for-profit hospitals, though the review process varies slightly depending on entity type. DOH and the AG have 180 days from the date of acceptance of the application to either approve, approve with conditions, or disapprove the application, though not-for-profit hospitals may be eligible for an expedited review.

New York: Effective on or about August 1, 2023, health care entities including physicians practices, physician groups, and management services organization must provide 30 day pre-closing notice to the New York Department of Health for transactions that result in a $25 million or more increase in a health care entity’s total gross in-state revenue. The recently enacted legislation does not grant the Department of Health approval authority, but requires that the Department post a summary of proposed transactions on its website and allow for public comment.
Oregon: The Health Care Market Oversight Program (the “HCMO Program”), administered by the Oregon Health Authority (“OHA”), requires 30-day pre-closing notice and approval of material health care transactions. If OHA determines a comprehensive review is needed, it then has up to 180 days to review transactions in detail for their impacts on cost, equity, access and quality of care. OHA has broadly enforced its review authority and captured several national platform transactions to date. OHA has also imposed conditions on certain transactions and plans to maintain oversight of the impacts of transactions for up to five years after closing.
California: Starting in April 2024, health care entities must notify the Office of Health Care Affordability (“OHCA”) of proposed transactions at least 90 days prior to closing. See Cal. Health & Saf. Code § 127500 et seq. OHCA will start accepting notices on January 1, 2024. From there, OHCA has 60 days to either approve a transaction or subject it to a lengthier cost and market impact review, which could extend the review period to over 200 days. OHCA issued proposed regulations on July 28, 2023 that further clarify the entities and transactions subject to review, details regarding comprehensive reviews, and other details of the notice process. After a public workshop and comment period, OHCA issued revised regulations on October 9, 2023. Regulations will be finalized in Q4 2023.
Massachusetts: Health care service providers and provider organizations with more than $25 million in annual patient revenue in Massachusetts must provide 60 days pre-closing notice of any material change transaction to the state Attorney General, the Center for Health Information and Analysis, and the Health Policy Commission (“HPC”). HPC has 30 days to either approve the transaction or initiate a more in depth cost and market impact review (“CMIR”), which may delay closing up to 215 days from the initial notice date.
Connecticut: The state Attorney General requires 30-day pre-closing notice of any material change transaction involving health care group practices, hospitals or hospital systems. If the Attorney General determines that the transaction will adversely impact competition, it may open a deeper inquiry or seek to postpone the transaction. While no strict timeline is given, transaction review may take up to, or greater than, 200 days after the notice is received.
Washington: Hospitals, hospital systems and provider organizations must provide notice to the state Attorney General of material transactions at least 60 days prior to closing. Washington’s review process applies to in-state entities, and out-of-state entities with sufficient patient revenue in Washington.
Nevada: Entities must inform the state Attorney General (30 days pre-closing) and/or the Nevada Department of Health and Human Services (60 days post-closing) of proposed health care transactions. The state does not have approval authority under either framework, but may initiate an investigation if it identifies any violations. Notice requirements are generally not triggered unless transaction parties have a large Nevada presence.

California: Proposed legislation in California would require 90-day pre-closing notice and approval from the Attorney General for medical groups, hospitals, hospital systems, health facilities, health care service plans, health insurers, and pharmacy benefit managers entering into certain transactions that would result in a material change with a value of at least $15,000,000. The Attorney General would have 90 days to either consent to, give conditional consent to, or not consent to the transaction. See AB 1091. This review process would be in addition to the existing process overseen by the Office of Health Care Affordability.
Pennsylvania: Proposed legislation in Pennsylvania would require provider organizations and for-profit entities who own or operate hospitals, hospice agencies, or nursing homes to notify the state Attorney General’s Office 90 days before entering into certain transactions or agreements that result in a material change. See Senate Bill 584. The Attorney General may utilize the full 90 days (with an option to extend an additional 30 days) to determine whether the proposed transaction is against the public interest. If passed, the legislation would take effect 60 days after enactment.

Washington: Proposed legislation to expand the scope of Washington’s existing review process failed in 2023. See Senate Bill 5241.
North Carolina: Proposed legislation requiring hospital entities and their affiliates to provide pre-closing notice to the state Attorney General’s Office of certain transactions failed in 2023. See Senate Bill 16.
Maine: Proposed legislation requiring health care entities to submit pre-closing notice of certain health transactions and obtain approval from the state Attorney General’s Office failed in 2023. See H.B. 894.
Florida: Proposed legislation requiring health care entities to submit pre-closing notice to the state Attorney General’s Office of certain transactions failed in 2020. See H.B. 711.

Contacts

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Deborah L. Gersh

Partner

Chicago+1 312 845 1307

Deborah.Gersh@ropesgray.com

See Bio

Timothy M. McCrystal

Partner

Boston+1 617 951 7278

Timothy.McCrystal@ropesgray.com

See Bio