Last month, we wrote about Florida House Bill 1243 (HB 1243), focusing on the mandatory reporting of certain hospital or group practice mergers, acquisitions and other transactions. Since then the state’s legislative 2019 regular session closed without action on HB 1243 in the Florida Senate. As such, HB 1243 is at least stalled until a later legislation session. Here are four updates on this bill for Florida healthcare dealmakers.
1) Quick Recap: Florida House Bill 1243
HB 1243, which passed 115-0 through the Florida House on April 11, set forth a new requirement 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 would have included certain prescribed information, such as a “description of the proposed relationship” among those involved in the material change, the specialty of the physicians and the office locations where services will be provided. HB 1243 did not have a dollar threshold for this notice, unlike the federal Hart-Scott-Rodino (HSR) Act.
2) HB 1243’s Potential Impacts
HB 1243 had multiple potential impacts, the most obvious being the state-required lead time before healthcare material changes. 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 a state attorney general. Under HB 1243, written notice would have been required at least 90 days prior to the proposed closing of a material change. This proposed waiting period is longer than typical waiting periods triggered by federal antitrust law, where most transactions under the HSR Act are allowed to close within 30 days of the Federal Trade Commission and Department of Justice notification. HB 1243 would have imposed a fine of up to $500,000 on any hospital, hospital system or practice that failed to provide the attorney general with the prescribed 90-day notice. This significant penalty conveys how seriously the Florida House viewed this mandatory reporting requirement.
3) HB 1243 Has Not Become Law
With the Florida Legislature’s regular session ending May 3, HB 1243 has died in the Florida Senate. After House passage of the bill, the bill was referred to the Senate Committee on Commerce and Tourism. However, upon the close of the session, the Florida Senate website reports the bill was “indefinitely postponed and withdrawn from consideration” and that it officially “died in Commerce and Tourism.” This result is in contrast to the House’s quick passage on April 11 with 115 affirmations (with none opposed) after being introduced on March 3. Without passage, Florida dealmakers can have further input before any future legislative efforts to pass another version of the bill.
4) Related Florida House Bill 843 Enacted Relating to Restrictive Covenants
While HB 1243 died in the Florida Senate, one section unrelated to mandatory reporting passed in another bill. Section 2 of HB 1243 would have voided restrictive covenants against physicians where a single entity employs or contracts with every physician in that county in that same specialty. This exact language was included in House Bill 843, which will take effect July 1, 2019, after passage on April 29 in both the Florida Senate and House. The Florida Legislature passed this language to address such covenants reinforcing physician specialty monopolies. To address this concern, HB 843 requires a second entity to enter the market and offer that specialty within the county for three years before such restrictive covenants would be enforced.
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While HB 1243 did not become law, how swiftly it moved through the Florida House and how little opposition it had in the Florida House suggests that future legislative sessions may consider similar reporting requirements. Further, other states may elect to follow suit, either because of similar antitrust concerns or out of an interest in regulating and/or monitoring healthcare transactions more generally. Any such change would necessitate additional planning in healthcare transactions and may influence investor interest in a particular state. Although this failed move by the Florida Legislature 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.