California Healthcare Transactions to Undergo Additional Advance Regulatory Scrutiny as New Office of Health Care Affordability Scrutinizes Cost and Market Impact of Transaction

Certain healthcare transactions closing on or after April 1, 2024 are subject to an advance notice regulatory review and analysis by a newly created Office of Health Care Affordability (“OHCA”) within the California Department of Health Care Access and Information.  The OHCA will prospectively analyze the transactions by conducting a cost and market review of significant transactions and report to the public on the anticipated impacts on the healthcare market.  The information submitted to the OHCA by the parties to the transaction will become public information.

Use of Non-Physician Healthcare Practitioners Expanding in California

I have been in healthcare legal practice since the mid-1990s.  During a summer in law school, I worked for the California Legislative Counsel Bureau, which is the agency that serves as legal counsel to the California legislature.  During my stint there, I recall various healthcare licentiates arguing about whether to expand the practice of non-physicians, with physicians generally asserting that such changes would be detrimental to healthcare quality and the other healthcare licentiates arguing that they provide a quality service at a more reasonable price-point.  This same tension has woven its way through legislative and payment policy during the intervening decades with the same arguments being advanced.  However, during that time we have seen the gradual increase in scope of practice of non-physician advanced practice professionals such as nurse practitioners (“NPs”), physician assistants (“PA”) and certified nurse midwives.  These trends are evidenced by several recent legal developments both in Medicare payment policy and California state law.

Revenue Cycle Impact On Healthcare M&A Transactions: Medicare Provider Agreement Assumption Choices Can Drive Transaction Structure

The past year in healthcare transactions has been one of the more interesting of my career, with the complete shutdown of certain industry segments for a period due to the COVID-19 public health emergency, modified business climate and reopenings, government stimulus payments through the CARES Act, Payroll Protection Program and Accelerated Payment Programs, ongoing tax changes (including potential for higher capital gain tax rates), high enterprise valuations and low borrowing costs. We view 2021 as an active market for acquisitions, including in healthcare. We note that increasingly we are seeing buying side activity from venture capital or private equity funds, where pro forma post-closing cash flow considerations are critical drivers of decisions.

A Summary Of Cares Act Provider Relief Efforts

As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the federal government allocated $175 billion in payments to be distributed to health care providers through the Provider Relief Fund (PRF) for expenses related to health care or lost revenue due to COVID-19. These distributions are grants, not loans, and do not need to be repaid so long as recipient providers comply with the applicable terms and conditions.

Read full publication on AHLA website.

Cares Act Provider Relief Funds: Reporting Set To Begin In 2021; New Reporting Requirements

The Health Resources and Services Administration (“HRSA”) has completed review of Phase 3 applications for the CARES Act Provider Relief Fund (“PRF”) and expects to distribute $24.5 billion to over 70,000 health care providers by the end of this month. These payments are intended to cover loss revenues attributable to the COVID-19 pandemic. According to HRSA, over 35,000 Phase 3 applicants will not receive any additional payment because they either experienced no change in revenues or net expenses attributable to COVID-19, or those that have already received funds that equal or exceed reimbursement of 88% of reported losses.1

New Cares Funding Available For Medicaid Providers

On June 9, 2020, the U.S. Department of Health and Human Services (HHS) announced that it will allocate approximately $15 billion to providers who participate in state Medicaid program and Children’s Health Insurance Program (CHIP) and who did not receive payments from the initial $50 billion in general allocations from the Provider Relief Fund under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This funding is intended to provide relief to Medicaid and CHIP providers experiencing lost revenues or increased expenses due to COVID‑19.

Happy New Year To California’s Rural Hospitals: New Corporate Practice Of Medicine Exception Effective January 1, 2017

Effective January 1, 2017, certain rural hospitals joined the list of providers specifically exempted from the Corporate Practice of Medicine (“CPM”) ban in California, which otherwise prohibits the employment of physicians and other medical professionals by corporations and other artificial legal entities. By signing AB 2024 on September 23, 2016, Governor Jerry Brown amended California Business and Professions Code Section 2401, allowing applicable hospitals to directly employ physicians and bill for their services. According to the bill’s lead author, Assemblymember Jim Wood, the exception purports to create a pathway and incentive for physicians to practice in underserved rural communities.