Illinois poised to expand healthcare transaction notice requirements

Expanded definition of “covered transaction”

HB 5000’s most significant change is to the Illinois Antitrust Act’s definition of “covered transaction.” As revised, the obligation to provide notice to the IL AG would apply to a merger, acquisition, or contracting affiliation “involving” two or more healthcare facilities or provider organizations not previously under common ownership or contracting affiliation, rather than only transactions “between” such entities.

The revisions to the definition further provide that a transaction is a “covered transaction” even where the direct parties are not themselves healthcare facilities or provider organizations, if they own or control, directly or indirectly, one or more of the healthcare facilities or provider organizations that will be under common ownership or contracting affiliation after the transaction closes.

These changes would broaden the reach of the IL AG notice requirement and effectively close deal structuring loopholes that permitted some healthcare transactions to avoid the requirement to provide notice (along with its related timing concerns and submission of documents and information to the IL AG).

New definition of “private equity company”

HB 5000 would add a definition of “private equity company” to the act:

[A] company or partnership that collects capital investments and purchases, as a parent company, at any level of corporate ownership, or through another entity or entities, so that it completely or partially owns or controls a direct or indirect ownership share of an Illinois healthcare entity or certain out-of-state healthcare entities with at least $10 million in Illinois patient revenue.

HB 5000 specifically states that covered transactions may include transactions where the parties are PE companies, if the statutory ownership/control and healthcare entity conditions are met.

Additional definitions to enhance clarity

HB 5000 would add definitions for “health care provider” and “health care services” to the act, helping clarify the use of those terms in other definitions related to the IL AG notice requirement. Of note, “health care services” specifies that the term expands beyond hospital and medical services to include (while not being limited to) dental, vision, and pharmaceutical services or products.

Expanded scope = expanded IL AG enforcement

HB 5000 similarly would expand enforcement from failures by a healthcare facility or provider organization to failures by any party to a covered transaction. A noncompliant party may be subject to a civil penalty of up to $500 per day for each day of violation, and the attorney general may seek relief in the Circuit Court of Sangamon or Cook County.

Practical implications for healthcare transactions

While the 30-day pre-closing notice framework remains, HB 5000 would broaden the scope of the notice requirement and the parties that have an obligation to provide notice, requiring additional attention when planning healthcare transactions.

• Assess the transaction: The expanded definition of “covered transaction” to include transactions “involving” two or more healthcare facilities or provider organizations not previously under common ownership or contracting affiliation will broaden the scope of transactions subject to the notice requirement.
  • If a deal has been ongoing, any previous analysis of the transaction should be revisited to account for the changes in HB 5000.
• Assess the parties: HB 5000 would require parties to evaluate IL AG notice requirements beyond the identity of the direct buyer and seller. Deal teams should assess whether any upstream parent, sponsor, management company, platform entity, or other direct or indirect owner controls healthcare facilities or provider organizations that will become commonly owned or affiliated as a result of the transaction.
• Special note for PE sponsors: PE sponsors should pay particular attention to HB 5000 because the bill expressly references PE companies in the definition of “covered transaction” and separately defines “private equity company” by reference to direct or indirect ownership or control of an Illinois healthcare entity or certain out-of-state healthcare entities with at least $10 million in Illinois patient revenue.
  • PE and other investment-backed parties should analyze ownership and control relationships at the platform, fund, parent, and portfolio-company levels to determine whether the transaction involves healthcare facilities or provider organizations through direct or indirect ownership or control.
• Prepare for scrutiny: Transaction timelines should account for both the initial 30-day pre-closing notice period and the possibility of an additional 30-day period after substantial compliance if the IL AG issues an additional information request within 30 days of receiving notice. The additional 30-day period can be extended if substantial compliance (as determined by IL AG) is not achieved.

Recommended next steps

It is near certain that Governor Pritzker will sign HB 5000 into law. In anticipation of its application going forward, parties to healthcare transactions should continue to carefully analyze the application of the IL AG notice requirement to their transaction, including the changes brought about by HB 5000, as part of their regulatory process planning, including review of whether the deal involves two or more healthcare facilities or provider organizations, whether those entities were previously under common ownership or contracting affiliation, and whether any direct or indirect owner or controller may bring the transaction within the expanded definition of “covered transaction.”