Beginning on Monday, July 1, 2024, Indiana Senate Bill 9 will require health care entities to provide the Indiana Office of the Attorney General (the "Indiana AG") with notice of mergers or acquisitions ninety (90) days prior to closing.
Indiana Senate Bill 9, which was signed into law on March 13, 2024, follows in the footsteps of similar legislative efforts that swept the nation in 2023 (see Navigating Emerging State Regulation of Health Care Map), but deviates from other state laws in certain ways discussed below. Notably, while most state health care transaction laws include processes to evaluate the impact of reported transactions on cost, access to, and quality of health care services, the new Indiana legislation does not address such criteria, and instead focuses more broadly on antitrust concerns. Additionally, the law is one of the first of its kind to explicitly capture private equity partnerships transacting with health care entities as "health care entities" themselves, independently subject to review requirements. The law reflects a growing nationwide movement targeted at private equity investments in health care. Since the passage of Indiana Senate Bill 9, we have seen proposed legislation aimed at private equity investments in health care emerge in California, Connecticut, Massachusetts, Minnesota, and at the federal level.1
A detailed description of the Indiana law and what it will mean for health care transactions in the state is provided below.
Standard.
An "Indiana health care entity" that is involved in a merger or acquisition with another health care entity with a value of at least ten million dollars ($10,000,000) must provide, at least ninety (90) days prior to the date of the transaction, written notice to the Indiana AG. Note that there is ambiguity regarding whether this ten million dollar ($10,000,000) threshold applies to the value of the transaction itself, the value of one of the health care entities party to the transaction, or the aggregated value of the health care entities party to the transaction.
Health Care Entities Definition.
The law defines "health care entities" as any of the following:
- Any organization or business that provides diagnostic, medical, surgical, dental treatment or rehabilitative care;
- Insurers that issue policies of accident and sickness insurance;2
- Health Maintenance Organizations;3
- Pharmacy Benefit Managers;4
- Administrators;5 and
- A private equity partnership seeking to enter into a merger or acquisition with an entity described in (1)-(5) above.
Notice Contents.
The law provides that the filing must include information regarding each health care entity party to the transaction (e.g., business address, tax identification number, description of the health care entity, contact information), descriptions of the transaction (including anticipated timeline), and copies of any materials submitted to other state or federal agencies regarding the transaction.
Transaction Review.
Within forty-five (45) days of submission of the notice, the law requires that the Indiana AG complete its review of the notice, analyze in writing any antitrust concerns with the transaction, and provide written analysis of any such antitrust concerns to the health care entity. The Indiana AG also has the ability to issue a civil investigative demand ("CID") to a health care entity that has submitted a notice to request additional information.
Notable Questions and Differences.
- Timing. The law requires an applicant to file at least ninety (90) days prior to closing of the transaction. This time frame is longer than what is typically seen in most states, although California also provides for ninety (90)-day pre-closing filings.
- Notice Only. The law does not grant the state with approval rights over the filed transactions, but does permit the Indiana AG to issue a CID for additional information.
- Broad Definition of "Health Care Entity." The definition of "health care entity" is written broadly to capture several stakeholders in the health care industry, including dental providers and private equity partnerships6 investing in health care, as further discussed below. There is still ambiguity regarding what constitutes an "organization or business that provides diagnostic, medical, surgical, dental treatment, or rehabilitation care" (e.g., whether psychologists, optometrists, behavioral health professionals are captured). Notably, however, management services organizations ("MSOs") and dental support organizations ("DSOs") are not included in the definition of "health care entity." Furthermore, parent companies and affiliates of Indiana health care entities are not included in the definition.
- Private Equity. The law captures as "health care entities" private equity firms merging with or acquiring another health care entity. Though the Oregon Health Authority has issued guidance stating that private equity firms that own health care entities are considered "health care entities" under Oregon's law,7 Indiana's legislation is the first state health care transactions law to explicitly include private equity firms in the statutory definition of "health care entity." Further to the bullet above, we note, however, that a private equity firm investing in an MSO or a DSO should not be subject to filing requirements because MSOs and DSOs do not appear to be captured as health care entities (and the legislation requires there be another health care entity that is a party to the transaction).
- "Indiana" Nexus?. The law subjects "Indiana" health care entities to the notice requirements; however, it does not define what constitutes an "Indiana" health care entity (e.g., whether a national platform that receives a single dollar ($1) in annual patient revenue from Indiana would be considered an "Indiana" health care entity) nor explain whether the other health care entity party to the transaction must also be an "Indiana" health care entity. Other states take varied stances on this issue. Oregon, for example, considers aggregate national revenue in determining materiality thresholds, which effectively captures more national platforms that may have a smaller in-state presence. In recent regulations, California, on the other hand, has limited revenue and assets counted to in-state figures, and has explicitly stated in guidance that it is only focused on impacts within the state.8 We have seen increasing pushback from stakeholders in the health care market in connection with state legislative efforts to regulate transaction activity outside of state borders, notably in the recent California regulatory process.9 Legislators will need to clarify this point in guidance or future regulation to avoid confusion.
- Vague Definition of "Merger." The term "merger" is defined to include an acquisition or transfer of assets, or the purchase of stock effectuated by a merger agreement. The law, however, does not provide clarity regarding whether a merger must meet certain materiality thresholds to trigger a filing. In other analogous state laws, legislators have generally set forth relevant materiality thresholds (e.g., dollar value of transaction, percentage disposition of assets, etc.) for transactions that trigger filing.10
- Materiality Thresholds. As discussed above, the materiality threshold for the Indiana law is ambiguous, but appears to require notice when an Indiana health care entity is involved in a merger or acquisition with another health care entity with a value of at least ten million dollars ($10,000,000). This threshold is relatively low in comparison to other state laws, such as the California and Oregon health care transaction laws, which require at least one entity to the transaction to have revenue of at least twenty five million dollars ($25,000,000). Helpfully, most add-ons or roll-up transactions generally fall under this ten million dollar ($10,000,000) threshold.
- Confidentiality?. The law provides that all "nonpublic" information in the filing will not be released to the public. What is unclear, however, is what information will be considered "nonpublic" and not subject to the public disclosure requirements. For example, Indiana has not clarified whether it will publicly disclose all filed transactions it receives in the manner that New York currently does (see New York List of Material Transactions).
Implications for Clients. Given the remaining ambiguity regarding what entities and which transactions the new Indiana law covers, health care entities of all kinds, and private equity partnerships, should remain apprised of any future guidance or regulations related to this new legislation and other emerging legislation related to private equity investments in health care. The law will have significant impacts on health care transactions involving Indiana health care providers, beginning July 1, 2024.
Footnote
1. See AB-3129 (California); HB-5319 (Connecticut); HB 4653 (Massachusetts); HF-4206 (Minnesota); HR 1754 (Federal); The Health Over Wealth Act (Federal); Corporate Crimes Against Health Care Act of 2024 (Federal).
2. The law captures insurers that issue accident and sickness insurance policies (as defined in IC 27-8-5-1), with the exception of accident only, credit, dental, vision, long-term care, or disability income insurance; coverage issued as a supplement to liability insurance; automobile medical payment insurance; a specified disease policy; a policy that provides indemnity benefits not based on any expense incurred requirements; worker's compensation or similar; a student health plan; or a supplemental plan that always pays in addition to other coverage.
3. As defined in IC 27-13-1-19.
4. As defined in IC 27-1-24.5-12.
5. As defined in IC 27-1-25-1 ("a person who directly or indirectly and on behalf of an insurer underwrites, collects charges or premiums from, or adjusts or settles claims on residents of Indiana in connection with life, annuity, or health coverage offered or provided by an insurer").
6. The term "partnerships" is not further defined or expanded upon in the law.
7. See Entities Subject to Review (Oct. 2022).
8. California Office of Health Care Affordability (OHCA) Finding of Emergency and Notice of Proposed Emergency Regulations (Nov. 2023).
9. During the rulemaking process, OHCA received a variety of public comments that noted the importance of OHCA only focusing on in-state revenue and assets, urging OHCA to clarify this point in regulations. The final regulations, which became effective in December, made clear that they only capture in-state figures as to avoid capturing national platforms that have a small presence in state. See OHCA Public Comments (Oct. 2023).
10. For example, New York requires notice for transactions that result in at least a twenty-five million dollar ($25,000,000) increase in a health care entity's total gross in-state revenue. N.Y. Pub. Health Law § 4550.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.