Health Care Transactions – Trends and Takeaways for 2017

May 2, 2017 by Kristina M. Tridico, Partner
Health Care Transactions – Trends and Takeaways for 2017

The American Health Lawyers Association (“AHLA”) Health Care Transactions conference was held recently in Nashville, Tenn., and everyone wanted to know what the status of health care deals is in light of the new administration and the efforts to repeal and replace the Affordable Care Act and what it all means for mergers and acquisitions in health care in the future. While there was no crystal ball or bright line test from the presenters at the conference, here are my thoughts on the consistent takeaways:

  • The Dating Game – Throughout the sessions, the investment bankers, attorneys, cyber-security professionals and health care professionals all said the same thing: get to know your partner and decide if it is the one for you. The type, terms and length of any transaction, whether it is a merger/acquisition with integration, a network affiliation or a service line management arrangement, all depend on who you pick as your partner. Utilizing technology in due diligence, cultural fit analysis and in-depth financial review is key to determining the on-going success of the venture.
  • Now is as Good as Ever – Vanderbilt Health’s Wright Pinson noted clearly that we have to do a better job of delivering outcomes. In explaining the expansion of the Vanderbilt network, he noted that “there is no more money” regardless of administration or change in law. If that is the case, then, we need to do more with less now and evaluate how to leverage strengths that already exist. Waiting for the “next” change will not allow you to progress beyond being responsive instead of proactive.
  • Data Rules – Private equity representatives, investment bankers, buyers and sellers alike all noted that a seller must have its “ducks in a row” in order to proceed on any affiliation, network or sale opportunity. What does that mean for you? It means that everyone from small hospitals to large systems have to utilize a contract management system, leverage electronic medical records (EMR) and provide quick and accurate responses to due diligence requests to bolster valuations, indicate sophistication and operational and patient care responsiveness. A “seller” can help negate the impact of deal fatigue or remorse as a transaction drags by providing the suitor with timely, responsive information. The technology does not have to be costly; you can utilize existing resources or find a new tool, but having contract compliance with ticklers and management cycles indicates an overall commitment to compliance, which is attractive to partners and PE firms alike.
  • Networks, Affiliations and Service-Line Management, Oh My – With numerous caveats about the important legal issues of Stark, antitrust and anti-kickback, it is clear that there are a number of business models available to systems to move their operations forward. Be prepared to do the deep questioning—start with that management interview and determine what are the goals of the operation? Do you want to sell—to maximize value? Quickly? With a strategic partner or an investor? What amount of independence is required? Will your states’ attorney general or other applicable governmental entity be agreeable if required? What is the impact on your contracts and patients? Are the physicians on board? All of these questions will direct you to a structure that makes the most sense for your organization.
What do I take from all of this? From a pure numbers perspective, health care deals declined slightly from 2011–2015; however, that is based on numerous factors such as fewer larger hospital transactions (large system integration) but with a greater impact on the industry and the desire for some of the remaining facilities to be independent. However, given the pressures on health care providers today and the favorable market for purchase multiples, we anticipate continued activity in health care mergers, acquisitions and integrations. Just make sure to date your suitor, consider that no time is like the present, know your data and ask the foundational questions that will create the right transaction for you.

If you have questions about health care transactions, please contact Kristina Tridico or another member of our Health Care Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.

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