January 1, 2024 ushered in a new year and new changes to the Illinois Antitrust Act, the State Finance Act, and the Illinois Health Facilities Planning Act. These changes result in new requirements for certain “health care facilities” or “provider organizations” undergoing a change of ownership and inject Illinois Attorney General (“Illinois AG”) oversight and discretionary involvement in a variety of transactions. Illinois has now joined a number of other states—including California, Connecticut, Massachusetts, Minnesota, Nevada, and New York—in designating a review process requiring reporting requirements for health care transactions, in addition to those required by licensing agencies or government payors.
Signed into law by Governor Pritzker on August 11, 2023, Illinois Public Act 103-0526 went into effect January 1, 2024. Under this Act, health care facilities1 or provider organizations2 that are party to a “covered transaction” are required to provide notice of that transaction to the Illinois AG at least 30 days prior to the transaction closing or effective date of the transaction. The method of providing notice is determined by the specifics of the transaction.3 The Office of the Illinois Attorney General states that the notice requirement “provides the Attorney General with information necessary to determine whether an investigation of the proposed transaction is warranted for potential anticompetitive effects that may harm Illinois businesses, consumers or workers, and helps ensure that competition in health care markets across Illinois remains vigorous and robust.”
A “covered transaction” means “any merger, acquisition, or contracting affiliation between 2 or more health care facilities . . . not previously under common ownership or contracting affiliation.” According to the Illinois AG, both parties to the proposed transaction must provide notice. The specific manner in which to provide compliant written notice differs for health care facilities and provider organizations. The notice requirement also applies to covered transactions between nonresident health care entities and Illinois health care entities if the out-of-state entity generates $10 million or more in annual revenue from patients residing in the state of Illinois. In this scenario, an “Illinois health care entity” means a health care facility that has an office or is doing business in Illinois. Any health care facility that fails to comply with this notice requirement is subject to civil penalties to the tune of (up to) $500 per day for each day the facility remains in violation of the requirement.
The Illinois AG has also been granted discretion and authority to request additional information. After providing timely notice to the Illinois AG, the Illinois AG may make any requests for additional information that is deemed relevant to its investigation of the covered transaction within 30 days of the date notice is received. If the Illinois AG does request additional information, the covered transaction may not proceed until 30 days after the parties have “substantially complied” with the request. Neither the threshold of what meets “substantially complied,” nor the scope of information requests from the Illinois AG are operationally defined.
When the Illinois AG has reason to believe that a health care facility has engaged or is engaging in a covered transaction without complying with the stated notice requirements, the Illinois AG can then apply for and obtain a temporary restraining order or injunction to prohibit the health care facility from “continuing its noncompliance or doing any act in furtherance thereof.” Before bringing such an action or seeking to recover any civil penalty, the Illinois AG must provide an opportunity for the health care facility or provider organization to cure its noncompliance within 10 days of being notified. However, the right to cure noncompliance only exists prior to the covered transaction’s proposed or actual closing date, not on or after.
The practical effects? A deal could be delayed both because of a failure of the parties to timely notify, or because of additional informational requests that must be “substantially complied” with before the transaction may proceed.
The scope of Illinois Public Act 103-0526 is broad and imparts new requirements for many health care entities and provider organizations doing business in Illinois. The full impact of this Act is yet to be seen and may largely depend on the level of engagement of the Illinois AG in requesting additional information after receiving notice of covered transactions. When contemplating changes of ownership, health care mergers and acquisitions, or contractual affiliations, it will be important to determine whether these transactions will trigger requirements to submit notice to the Illinois AG, identify what form that notice must take, and plan for potential delays related to possible inquiries by the Illinois AG regarding the nature of the transaction.
END NOTES
1 “Health care facility” is defined (in part) in 740 ILCS 10/7.2a as:
“Health care facility” means the following facilities, organizations, and related persons:
(1) An ambulatory surgical treatment center required to be licensed under the Ambulatory Surgical Treatment Center Act.
(2) An institution, place, building, or agency required to be licensed under the Hospital Licensing Act.
(3) A hospital, ambulatory surgical treatment center, or kidney disease treatment center maintained by the State or any department or agency thereof.
(4) A kidney disease treatment center, including a free-standing hemodialysis unit required to meet the requirements of 42 CFR 494 in order to be certified for participation in Medicare or Medicaid under Titles XVIII and XIX of the federal Social Security Act of 1935.
(5) An institution, place, building, or room used for the performance of outpatient surgical procedures that is leased, owned, or operated by or on behalf of an out-of-state facility.
(6) An institution, place, building, or room used for provision of a health care category of service, as defined under the Illinois Health Facilities Planning Act, including, but not limited to, cardiac catheterization and open heart surgery.
2 “Provider organization” is defined in 740 ILCS 10/7.2a as:
“Provider organization” means a corporation, partnership, business trust, association, or organized group of persons, whether incorporated or not, which is in the business of health care delivery or management and that represents 20 or more health care providers in contracting with health carriers or third-party administrators for the payment of health care services. “Provider organization” includes physician organizations, physician-hospital organizations, independent practice associations, provider networks, and accountable care organizations.
3 For example, health care facilities that are part of a covered transaction and file a premerger notification with the Federal Trade Commission or the U.S. Department of Justice in compliance with the Hart-Scott-Rodino (“HSR”) Act shall provide a copy of that filing to the Illinois AG at the same time it is provided to the federal government. Submitting a copy of the HSR filing at the same time as it is provided to the federal government satisfies the Illinois notice requirement. Separately, any transactions or change of ownership applications that are submitted to the Illinois Health Facilities and Services Review Board in compliance with the Illinois Health Facilities Planning Act are now also submitted to the Illinois AG. According to the Illinois AG, in this scenario the Health Facilities and Services Review Board is required to notify the Illinois AG. For all other “covered transactions,” the parties must submit notice by providing the information on the Illinois AG’s “Healthcare Transaction Notice Form.”
