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Concerned about Indiana’s rising health care costs, the Legislature this year approved a new law that will bring more scrutiny to health care mergers and acquisitions.
Under the measure, an Indiana health care entity that is involved in a merger or acquisition with another health care entity with total assets, including combined entities and holdings, of at least $10 million must provide written notice of the deal to the Indiana Attorney General’s office at least 90 days prior to the date of the merger.
The attorney general can then review the notice for any antitrust concerns.
Gov. Eric Holcomb signed Senate Enrolled Act 9 into law in March. Senator Chris Garten, R-Charlestown, authored the bill, which drew bipartisan support in the Indiana General Assembly. The bill passed the Senate by a 49-0 vote and 60-35 in the House.
Gloria Sachdev, president and CEO of the Employers’ Forum of Indiana, said the new law just requires prior notification to the Attorney General’s office and isn’t mandating state approval of hospital and other health care entity mergers.
“I think it’s a great step forward for providing transparency and providing a lens through which any antitrust issues can be identified on the front end,” Sachdev said.
Sachdev said a big concern for her group that’s addressed in the law is the inclusion of private equity firms among those entities subject to providing notification.
She said there needs to be a better understanding of who owns these organizations that are looking to acquire hospitals and health care providers and the ability to track the price and quality of health care.
“We know they’re here. We just don’t know to what extent,” Sachdev said, adding that the pre-merger notification was necessary to protect Hoosiers.
When private equity firms acquire health care providers, prices go up and staffing goes down, Sachdev said.
Task force makes recommendations
SEA 9 grew out of recommendations from a legislative Health Care Cost Oversight Task Force, which met four times during as part of a 2023 interim study committee.
Garten said there was an antitrust concern about a lack of competition in Indiana’s health care arena, leading to higher prices for consumers.
Senator J.D. Ford, D-Indianapolis, co-sponsored SEA 9.
Ford said the new law’s genesis stemmed from Indiana’s traditionally high health care costs and the Legislature’s desire to try and reduce those prices through legislation.
In 2022, the Employers Forum of Indiana reported that health care insurance premiums have been rising every year since 1999 and cost, on average, more than $22,000 a year for a family plan. Hoosiers pay more than people in any surrounding state, and the 15th highest amount in the nation, according to the forum.
Ford cited an October 2023 survey by Forbes Advisor listed Indiana as the 10th worst state in the country for health care, when it comes to access, outcomes, cost and quality of hospital care. In that survey, the state’s average annual health insurance premium for employees with single coverage through employer-provided health insurance was listed at $1,774. But another Forbes Advisor survey listed Indiana health care costs at 24th in the nation with an average annual premium for single coverage at 1,711.
Ford said the hope is that the new law, with increased scrutiny and transparency of health care mergers and acquisitions, will ultimately reduce costs.
He gave credit to Garten for introducing the bill.
While Ford wasn’t sure if there would be follow-up legislation next year regarding approval of mergers by the state attorney general’s office, he said he does think there will be more bills in general looking at reducing the cost of health care from both sides of the political aisle.
“I definitely feel there is an appetite,” Ford said.
Opposition to the new law
The Indiana Hospital Association raised concerns about the notification requirement at a Jan. 24 Senate Committee on Health and Provider Services hearing.
Brian Heaton, an attorney with Krieg DeVault’s Carmel office, testified on behalf of the association.
Heaton provided background on the federal mergers and acquisitions guidelines and pointed out that the Biden Administration had put new guidelines in place in December for the Department of Justice and Federal Trade Commission.
He said the new guidelines had strengthened the DOJ and FTC’s ability to review transactions and result in more mergers and acquisitions in all industries, including health care, to be reviewed by the federal government.
Heaton questioned the need for notification to the Indiana Attorney General’s office with a federal process already in place that’s been strengthened and guided by extensive case law, as well as a 30-day waiting period for the DOJ and FTC before they look at transactions.
The attorney also cited the impartiality of a federal review process that is devoid of the politics involved on a state-by-state level.
Heaton said he had concerns there were not enough safeguards in place with the new law to protect the confidentiality of the review process.
“Any disclosure, whether inadvertent or not, will create a lot of negative, serious impact. It impacts the deal itself. When I’m working on transactions, the deal getting out into the market is a highly big concern for a lot of many different factors. It can hurt the value of the deal. It can hurt relationships with third parties that the merger participants are dealing with. And most importantly, it creates a lot of uncertainty with employees,” Heaton said.
Indiana Lawyer submitted questions to the hospital association for comment for this story. In an email Wednesday, Natalie Russell, the association’s communications manager, said the organization had chosen not to comment.
Future impacts on mergers?
Ford said it’s too soon to tell if the new law will impact any health care-related mergers or acquisitions in the state.
He noted there have been concerns raised about large hospital chains acquiring hospitals in rural areas and then closing them a relatively short time later.
The senator cited examples in Indiana where, in 2022, national hospital chain Ascension closed its hospital in Bedford a little more than a decade after acquiring it, and Community Health Network’s closure of the Westview hospital in 2016.
Isaac Willett, a partner in Taft Stettinius & Hollister LLP’s health care group, said he didn’t think SEA 9 would have a major impact on how many health care-related deals get done.
“But it will impact how long it takes a deal to get done,” Willett said.
The longer it takes to close a merger or acquisition, the more costs a party has in general, Willett noted.
Given Indiana’s political landscape, Willett acknowledged he was surprised that a red state had passed a law with language like SEA 9.
Willett said most states with similar laws were generally blue states like Oregon, Massachusetts or New York.
He pointed out that Indiana in general has taken a hands-off approach as far as intervening in business.
The Taft attorney said he didn’t think there would be a push to require approval of deals by the attorney general’s office.
The Federal Trade Commission announced in January that for 2024, the size-of-transaction threshold for reporting proposed mergers and acquisitions under Section 7A of the Clayton Act would adjust from $111.4 million to $119.5 million.
Willett said Indiana’s law, with its $10 million threshold, is quite low by comparison.
He added that private equity firms are active in all states, with a significant deal volume.
“I can’t put a number on it, but it’s an active segment of the M&A market,” Willett said.
Sachdev reiterated that the new law just requires notification for health care entities interested in merging.
She said she is not aware of any other states with similar laws that have had issues with mergers and acquistions.
“If there are no antitrust concerns, they have nothing to worry about,” Sachdev said.•
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