On Jan. 21, 2025, Indiana legislators introduced a new bill in the Indiana House of Representatives targeting healthcare transaction reporting and healthcare provider ownership disclosures (the IN Bill). The IN Bill proposes to expand on the existing Indiana transaction reporting law, which went into effect July 1, 2024 (the IN Law), turning Indiana from a reporting state to an approval state. For a detailed analysis regarding the IN Law in its current form, see this McGuireWoods alert.
When the IN Bill was introduced it had two objectives: (a) impose Indiana attorney general approval requirements over all transactions involving private equity funds and (b) require Indiana hospitals, physician groups and certain insurers to disclose ownership on an annual basis. On Feb. 4, 2025, the Indiana House Committee on Public Health amended the IN Bill (the Amended IN Bill) in a manner that broadens the IN Bill’s objective. Though the disclosure requirements for certain entities remain the same, the approval requirement would apply to all healthcare transactions regardless of the involvement of private equity funds. If the Amended IN Bill is approved, all changes will go into effect July 1, 2025.
1. The Current Notification Requirement. Currently, an Indiana healthcare entity[1] that is involved in any “merger”[2] or “acquisition”[3] with another healthcare entity that has total assets of at least $10 million (a covered transaction) must report the proposed transaction to the Indiana attorney general (the IN AG). The report of the covered transaction is due 90 days prior to the “date of the merger or acquisition.” The IN AG is charged with reviewing the report for antitrust concerns and reporting an analysis to the filing party.
2. Proposed Approval Requirement. If approved, the Amended IN Bill would (a) remove the $10 million asset threshold for covered transaction reportability and (b) require the IN AG to review and approve all transactions between Indiana healthcare entities and other healthcare entities. Under the Amended IN Bill, the IN AG has 90 days to review a reported transaction and issue a decision if the proposed transaction is approved but may extend the decision period by 90 days for “good cause,” which is undefined.
The Amended IN Bill proposes to provide the IN AG with criteria that must be met to approve the covered transaction. These criteria include:
- ensuring the transaction does not significantly diminish the availability or accessibility of healthcare services to the community affected by the transaction
- validating that the transaction is in the public interest
- verifying that the healthcare entity involved in the transaction exercised due diligence in
- deciding to engage in the merger or acquisition
- identifying each person to engage in the merger or acquisition
- negotiating the terms and conditions of the merger or acquisition
- ensuring the procedure used by the healthcare entity agreeing to merge or be acquired was adequate, including the use of appropriate expert assistance
- Note: The IN AG is empowered to employ, at the expense of the healthcare entity initiating the merger or acquisition, reasonably necessary expert assistance
- verifying that any conflict of interest that potentially impacts competition in the relevant markets was disclosed to each party of the merger or acquisition, including conflicts related to directors, executives, experts, partnerships and joint ventures
- ensuring that any management contract proposed under the merger or acquisition is for reasonably fair value
- ensuring that in acquisitions between healthcare entities, that the healthcare entity being acquired will receive full and fair market value under the proposed acquisition
- verifying that the proposed merger or acquisition complies with applicable state or federal law.
The Amended IN Bill allows the IN AG to bring a civil suit to enforce the reporting requirements, and the IN AG can issue a civil penalty up to $15 million for a violation.
3. Proposed Disclosure of Ownership Requirement. The IN Bill contemplates that Indiana hospitals, physician groups and insurers would make an annual report to the Indiana Department of Health of their ownership structure. Specifically, each of these entities would be required to disclose the name of each person or entity that has an ownership interest of at least 5%, a controlling[4] interest, and/or an “interest as a private equity partner,” which is not defined.
The report must be made annually, and late reporting carries a penalty of $1,000 per day for hospitals, insurers and physician group practices of more than five practitioners and $500 a day for physician groups of two or fewer practitioners.
If passed in its current form, the Amended IN Bill will make Indiana one of the most prescriptive approval states in the United States for healthcare transactions. McGuireWoods will continue to watch the Amended IN Bill’s activity at the Indiana statehouse. As states continue to increase governmental scrutiny over private equity in healthcare, McGuireWoods continues to monitor and report on the evolving regulatory landscape. For any questions, reach out to the authors.
[1] Healthcare entities are defined to include any organization or business that provides diagnostic, medical, surgical, dental treatment or rehabilitative care. The definition also captures certain insurers, health maintenance organizations, pharmacy benefit managers and insurance administrators, as well as private equity partnerships seeking to enter into mergers or acquisitions with one of these other health care entities.
[2] Mergers are defined as inclusive of any change of ownership, and provides the example of an acquisition of assets or the purchase of stock “effectuated by a merger agreement.”
[3] Acquisition is defined as any agreement, arrangement or activity, the consummation of which results in a person acquiring directly or indirectly the control of another person. Control is not defined.
[4] The possession (directly or indirectly) of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise. A person’s beneficial ownership of 10% or more of the voting power of a corporation’s outstanding voting shares creates a presumption that the person has control of the corporation. See In. Code § 23-1-43-8.