Indiana M&A Law Prompts Preparation From Health-Care Providers

An Indiana law will go into effect on July 1 that has significant implications for the state’s health-care mergers and acquisitions. For those contemplating potential M&A activity, the new law will require additional forethought and planning to ensure a successful transaction.

The law aims to control costs by identifying potential antitrust concerns and maintaining competitiveness. Health-care entities must notify the state attorney general at least 90 days prior to closing certain transactions.

Indiana is just one of several states to enact such notification requirements. However, Indiana’s law has unique characteristics, such as the inclusion of private equity partnerships in its covered entities and definitions, that should raise the alarm for long-term care providers. Here’s what health-care dealmakers in the state need to know.

Senate Enrolled Act 9 amends Indiana Code Section 4-6-3-6 and is broadly applicable to any merger or acquisition of health-care entities, including both asset and equity transactions, as well as direct and indirect changes in control.

The law extends to a host of health-care entities, including:

• Any organization or business that provides diagnostic, medical, surgical, dental treatment, or rehabilitative care
• Insurance providers, pharmacy benefit managers, and health maintenance organizations
• A private equity partnership that seeks to enter a merger or acquisition with an entity to which the law is applicable

The triggering threshold for this attorney general notice is if an Indiana health-care entity is involved with another health-care entity with total assets—including combined entities and holdings—of at least $10 million dollars.

While the Indiana law doesn’t appear to require approval by the attorney general, it does give the attorney general 45-days after the required notice has been submitted to review the information. During that period, the attorney general may analyze antitrust concerns, and issue a civil investigative demand requesting additional information from the entity that has submitted notice.

As part of the submission, the parties must also include a copy of any materials that have been submitted to a federal or state agency concerning the transaction, such as change of ownership notices and applications to the Indiana Department of Health or Medicaid.

Special Considerations

For long-term care providers, a few things stand out from this new Indiana disclosure requirement. Unlike other states that may limit the state approval law to certain provider types, or provide certain exceptions such as for internal corporate restructuring, or where other required notices also satisfy the disclosure, the broad definition of health-care entity in Indiana’s law reasonably applies to all types of providers—even those that may not provide significant medical care or receive federal reimbursement, such as private pay assisted living facilities.

The $10 million asset requirement is relatively low and is based on the size of the entity, not the size of the contemplated transaction. Except for smaller home health or hospice transactions, even a one- or two-facility nursing home transaction will likely trigger the law’s notice requirement, particularly if parties are expected to consider assets of combined entities and holdings.

The broad definitions of acquisition and merger encompass direct and indirect changes in control, which extends the law to transactions at higher levels that often result in minimal notice requirements. These types of transactions, including internal restructurings where no money is exchanged, will now be required to go through the notice process outlined in this law.

Preparation

Without further regulation or agency guidance, this Indiana law will have far-reaching impacts on almost all of the state’s health-care entities in the state. To determine the law’s applicability, Indiana health-care entities—including long-term care providers—should consider several factors:

• Does an Indiana health-care entity require a physical presence within the state or a license by the Indiana Department of Health or another state agency?
• How is the $10 million asset threshold calculated and applied?
• What happens if the attorney general doesn’t send written notice of antitrust concerns?
• Is providing notice 90 days prior enough to satisfy the law?
• How does this new requirement impact transactions closing in 2024, and will there be a transitional period after July 1?

Any Indiana health-care entity considering an ownership-related transaction needs to understand how the answers to these questions may affect them. These entities should also start thinking about what information they will need to disclose and how the law could impact the timing of a transaction.

If entities are actively negotiating or contemplating transactions that are expected to close after July 1, parties should prepare for extended timelines and increased costs and resources to account for the submission process and the attorney general’s review and account for additional considerations such as ensuring the confidentiality of sensitive information that be included in the require notice.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Jaya White is partner at Quarles & Brady where she is the Chicago office chair of the health law group and the national co-chair of the long-term care practice.

Randall R. Fearnow is partner at Quarles & Brady where he represents health care providers before state and federal courts and administrative agencies.

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