Most lawyers specializing in mergers and acquisitions (M&A) apply a standard approach to handling acquisitions and divestitures across a broad spectrum of industry contexts, calling in subject-matter specialists as needed to review specific representations and warranties or to address other discrete issues that arise. While this process can be successful for transactions in many industries, the complex web of statutes and regulations governing the business of health care necessitate a more integrated approach when managing any health care-related M&A transaction. This has never been more important than today, as health care entities strive to implement the requirements of the Patient Protection and Affordable Care Act. This article discusses several areas of health care law that are of critical importance to entities seeking a successful health care M&A deal.
Value-Based Purchasing
The traditional process of evaluating the financial health and performance of a health care entity based on its cost structure, payer mix and volume indicators is being supplemented by a focus on quality of care that can meaningfully affect the value of a target entity. For example, the new Hospital Value-Based Purchasing (VBP) Program adopted by the Centers for Medicare & Medicaid Services (CMS) will adjust payments to acute care hospitals based on patient outcomes. Specifically, beginning in January, the VBP program requires that the CMS withhold a percentage currently 1 percent but rising to 2 percent by 2017 of all federal payments to acute care hospitals. The CMS will distribute the approximately $850 million in annual withholdings to hospitals that participate in the VBP program in lump-sum payments based upon each facility’s performance under 25 quality metrics, eight of which are directly tied to patient satisfaction.
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