Illinois notice requirement for health care M&A and contracting affiliations takes effect January 1, 2024

Starting January 1, 2024, health care facilities and provider organizations that are parties to covered Illinois M&A transactions or new contractual affiliations will be required to submit advance notice to the Illinois attorney general under Illinois Public Act 103-0526 (House Bill 2222), which Illinois Governor J.B. Pritzker signed into law on August 11, 2023.

PA 103-0526 defines “covered transaction” as any merger, acquisition or contracting affiliation between two or more health care facilities or provider organizations that were not previously under common ownership or contracting affiliation.

• The statute defines a “contracting affiliation” as the formation of a relationship between two or more entities (other than entities under common ownership) that permits the entities to jointly negotiate (or one entity to negotiate for the other) with health carriers or third-party administrators over rates for professional medical services.
• “Provider organization” is defined as an entity or organized group that is in the business of health care delivery or management and represents 20 or more health care providers in contracting with health carriers or third-party administrators for the payment of health care services. This definition specifically includes physician organizations, physician-hospital organization (PHOs), independent practice associations (IPAs), provider networks and accountable care organizations (ACOs).
• The statute excludes facilities operated as a part of the practice of a physician or other licensed health care professional unless the facility is of a type specifically included within the definition of health care facility (such as an ambulatory surgical treatment center, kidney disease treatment center, or location used for cardiac catheterization or open heart surgery). While some physician practice transactions will avoid triggering the notice obligation, notification may be required for transactions and affiliations involving practices with 20 or more health care providers or other provider organization arrangements.

PA 103-0526 will require 30 days prior written notice to the Illinois attorney general and allow the attorney general to investigate and request additional information. Reporting will be required for a covered transaction between an Illinois health care entity and an out-of-state health care entity if the out-of-state entity generates $10 million or more in annual revenue from patients residing in Illinois.

The required notice will vary depending on whether Hart-Scott-Rodino Act (HSR) premerger notification is filed (in which case the notice requirement will be satisfied by submitting a copy of the HSR filing at the same time) or the facility files an application for a change of ownership with the Illinois Health Facilities and Services Review Board (in which case that filing will be sufficient). In all other cases the written notice will need to identify the parties and the locations where each party provides health care services, as well as the nature and purpose of the transaction and the anticipated effective date.

If the attorney general requests additional information the transaction will not be allowed to proceed until 30 days after the parties to the covered transaction have substantially complied with the request.

When planning Illinois health care M&A transactions or contractual affiliations it will be important to determine whether the arrangements will trigger obligations to notify the Illinois attorney general and to consider potential delays due to the notification process. For more information on PA 103-0526 or related issues, contact Rick Hindmand or another member of the McDonald Hopkins' healthcare practice group.