Partners Steven Eisenberg and Christopher Swift discuss six legal aspects any hospital considering a merger should be aware of in the August 11, 2011, edition of Becker’s Hospital Review.
In the interview, Eisenberg and Swift advise hospitals to know a few legal basics before they partner permanently with other healthcare organizations, the first being to draft a confidentiality agreement, detailing the exclusivity of the relationship between the two parties merging together. “The reason parties want to make it exclusive is because they are investing a large amount of resources,” Eisenberg said. “Often times a no-shop, or exclusivity, clause will start off discussions.”
Swift and Eisenberg both encourage hospitals to examine antitrust issues carefully, in addition to entering the review process with caution. Swift advises non-profit hospitals in particular to exercise extra caution when being examined by a governmental body. “When you start converting a non-profit entity to a for-profit entity, you can imagine the community might get upset, and the donors might get upset,” said Swift.
Additionally, both parties must be aware of the liabilities the selling party has, such as outstanding debt. Eisenberg also mentions the Federal Trade Commission’s increased scrutiny. “They’ve really been looking at market consolidation issues and issues with respect to the availability or monopoly of service lines, and compared with three years ago, it’s a much different playing field,” Eisenberg said.
Lastly, Eisenberg notes that pre-acquisition steps, like sharing or affiliating service lines, are becoming more common.