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CT AG Leads Charge to Increase Transparency of Hospital-Physician Acquisitions and Facility Fees

Robert F. Leibenluft

Robert F. Leibenluft,

Washington, D.C.

Lauren E. Battaglia

Lauren E. Battaglia,

Washington, D.C.

Leigh Oliver

21 April 2014
Last week Connecticut Attorney General George Jepsen issued a report detailing concerns regarding the recent trend in hospital-physician affiliations and acquisitions and the lack of consumer visibility into hospital-based facility fees that may be imposed following the affiliation of an independent physician group or outpatient facility with a hospital. 
CT AG Leads Charge to Increase Transparency of Hospital-Physician Acquisitions and Facility Fees

According to the Connecticut Attorney General, the increase in the number of hospital acquisitions of independent physician groups and outpatient facilities raises the risk that hospitals and health systems will be able “to secure market power…that [will] give them enhanced bargaining power over their reimbursement.”  The report largely focuses on proposing legislation to facilitate greater transparency related to facility-based fees, but it also signals that concerns over these fees are related to increases in consolidation among healthcare providers.

In order to improve its ability to monitor the impact of these acquisitions, the Connecticut Attorney General has proposed a bill that would require the notification of transactions involving a change in ownership of independent physician practices.  Specifically, the parties would be required to provide: (1) a description of the proposed relationship; (2) the names and specialties of each physician that is the subject of the proposed transaction and the names of those physicians who will be affiliated with the hospital upon completion of the affiliation; (3) the names of the business entities that are to provide services pursuant to the affiliation; (4) the address for each location where services will be provided; (5) a description of the services to be provided at each location; and (6) the primary service area to be served by each location.  The bill would also require hospitals to file annual reports “describing the activities of the group practices owned or affiliated with” the hospital.  Physician group practices of thirty or more physicians would also be required to file annual reports describing the physician members of the group and the services offered by the practice.

Federal antitrust laws generally require mergers and acquisitions of a certain size—the current threshold is $75.9 million—to be reported to the FTC and DoJ Antitrust Division under the Hart Scott Rodino Act.  Many hospital acquisitions of other hospitals do not meet this reporting threshold, and certainly most hospital acquisitions of physician groups do not trigger this reporting requirement.  The proposed Connecticut legislation (and similar laws in other states) would not only provide notice of acquisitions of independent physician practices, but presumably would also capture hospital acquisitions of rival hospitals where the acquired hospital has an existing employed physician group.  In other words, the proposed notice requirement would create another avenue for regulators to be on notice of healthcare provider transactions before they are consummated.

Robert F. Leibenluft

Robert F. Leibenluft,

Washington, D.C.

Lauren E. Battaglia

Lauren E. Battaglia,

Washington, D.C.

Leigh Oliver

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