New California Healthcare Agency Requires M&A Review

California’s new regulatory review process may make it more strenuous for healthcare corporations to complete mergers and acquisitions, as well as other transactions.

Following Governor Gavin Newsom’s signing of healthcare omnibus bill SB184 in June, which created a new state agency to monitor and manage healthcare costs in the state, corporations wanting to carry out M&As will need to heed new authority. The Office of Healthcare Affordability (OHCA) will implement oversight and funding measures aimed at capping costs.

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Beginning in April 2024, OHCA will have advance review authority over mergers, acquisitions, corporate affiliations, and other transactions that result in material changes of assets control or governance of “health care entities,” the new law states. Such entities include payors, providers, and fully integrated delivery systems.

If an entity wants to enter a transaction of the type described, it will have to submit written notice of its intent to OHCA 90 days ahead of a transaction or agreement. Then, OHCA will have 60 days to determine whether to do a cost and market impact review and create a public report, or to grant a waiver of a review. Under the law, transactions may not proceed without either a review or a waiver of a review.

A review may include investigations of the healthcare entities and other relevant players in the proposed transaction. OHCA may issue subpoenas and request data and documents. And, if approved, any transaction may not take place before 60 days following the completion of the review, which has no time limitations.

Not all transactions are included under the new law. Those within the scope of existing market oversight responsibilities of the Department of Managed Health Care (DMHC), the Attorney General, and the Department of Insurance are exempt from this review process. Also, certain transactions from counties acquiring entities to increase healthcare access are exempt.