On May 7, 2019, The Governor of the State of Washington signed into law Substitute House Bill 1607 (“HB 1607”) – a first-of-its-kind premerger notification requirement covering healthcare transactions closing on or after January 1, 2020. HB 1607 is a timely reminder that state attorneys general have not hesitated in recent years to enforce both federal and their own state antitrust laws when a transaction poses local anticompetitive concerns.
HB 1607
HB 1607 applies to transactions involving hospitals, hospital systems and provider organizations representing at least seven individual providers in payer negotiations. Parties must notify the Washington Attorney General at least 60 days prior to closing any transaction involving two or more such entities and resulting in a “material change,” including the following:
- any acquisition conferring control, directly or indirectly over the target;
- any merger resulting in the consolidation of two or more entities, including any transaction that combines two entities under a common parent and the formation of a new organization by two or more entities;
- any “contracting affiliation” under which the parties would jointly negotiate with third-party payers or administrators on rates for professional medical services; and
- any of the above transactions involving a Washington entity and an out-of-state entity that generates $10 million in annual health services revenue from Washington state residents.
The new state filing requirement seeks "to ensure that competition beneficial to consumers in health care markets across Washington remains vigorous and robust." While similar in purpose and nature to the federal Hart-Scott-Rodino Act, the scope of the Washington healthcare premerger law differs in important ways and on balance will capture a much broader array of transactions within the healthcare space. For example, the Hart-Scott-Rodino Act includes a “size of the transaction” test and a “size of the parties” test that serve to limit the Hart-Scott-Rodino premerger notification requirement to transactions and parties that meet certain size requirements. HB 1607 does not include any such thresholds to limit the notification requirements to large transactions.
HB 1607 Filing Requirements
- Failure to file carries a civil penalty of up to $200 per day.
- No dollar thresholds limit the law’s application by the size of the in-state parties or the transaction.
- Parties must submit a copy of any HSR Act premerger notification.
- For transactions not reportable under the Hast-Scott-Rodino Act, HB 1607 requires the following information in no particular format:
- the names of the parties and their current business addresses;
- the locations where each party provides healthcare services;
- a description of the nature and purpose of the proposed transaction;
- the anticipated closing date; and
- any additional information the parties choose to provide voluntarily.
Like the HSR Act, HB 1607 allows for the state attorney general to request additional information from the parties within 30 days after the filing, but in contrast to the HSR Act, HB 1607 provides no mechanism for suspending the waiting period beyond 60 days from filing and provides no mechanism for the early termination of the waiting period.
Key Considerations
- Parties should seek antitrust advice if a transaction may be covered by the state’s healthcare premerger law, particularly if the transaction involves competing providers or parties in a vertical relationship. Developing a thorough understanding of the transaction’s potential competitive impact will be essential to anticipating questions from the Office of the Attorney General and minimizing the time and scope of any investigation by the state attorney general.
- Parties to transactions covered by the HSR Act should carefully consider the timing of their federal and state filings and should consult antitrust counsel to navigate confidentiality issues and facilitate productive communications among agency staff at both the state and federal levels.
- It is not clear yet whether the Washington Attorney General will follow federal guidance relating to the HSR Act, including on issues such as “gun jumping.” Parties to transactions covered by the Washington healthcare law should use caution before engaging in any joint activities prior to the end of the 60-day waiting period.