Parties to a health care transaction must be prepared for and informed on a number of aspects unique to the health care industry. This is certainly true for proposed changes of ownership or control, where a buyer plans to make changes to health facility licensees or their upper tier owners. One commonality in many of these transactions is the need for notice. However, knowing that notice is required is only the tip of the iceberg: in order to ensure a smooth transaction, parties need to understand and act on the “who, what, when, where, and why” of notice. Below is an analysis of each of these aspects as well as an example of how it matters.
- Who? Parties must accurately identify the party that needs to be notified (e.g., the identity of the appropriate regulatory agency) and the party that must provide notice (e.g., buyer, seller, or both). For example, the buyer and seller involved in a Maryland nursing home transaction must both provide notice to the Maryland Medical Assistance Program. If only the buyer provides notification, such notice would be considered deficient under current Maryland requirements.
- What? It is often not enough to simply state that a transaction will be occurring. Agencies sometimes require specific information, such as the identities of buyer and seller and the proposed closing date. For example, parties to a New Jersey assisted living change of ownership are required by regulation to include the following in the notice letter: a statement that the applicant intends to purchase the facility, identification of the facility by name, address, county, and a listing of the number and type of licensed beds at the facility.
- When? Parties need to ensure that notice is timely. Is notice required 60 days in advance, 60 business days in advance, or 30 days post-closing? These are important details. For example, the buyer in a Virginia nursing home transaction must submit notice to the Department of Health 30 “working” days (i.e., business days) in advance of a change of ownership, which is six weeks in advance rather than four. If the buyer submits four weeks in advance of the change, the Department of Health could argue that notice to the agency was deficient and prohibit the transaction from occurring until the appropriate notice period has passed.
- Where? Once parties know “who” they usually know “where.” However, make sure notice is sent to the correct address. Some agencies have a physical address that is different from a mailing address, or a mailing address that is different from an overnight mailing address. For notices to facility residents or patients, you may need to know the location of any authorized representatives or other parties. For example, parties to a transaction involving a Virginia assisted living facility transaction must submit notice to the appropriate regional office at least 60 days prior to the change of ownership. In our experience, this requirement is strictly enforced. If a notice is submitted to the wrong regional office, it will be sent via interoffice mail to the appropriate office and the notification’s effective date may be delayed to the date of receipt by the appropriate regional office.
- Why? The answer to “why?” is almost always the same: those being notified need to understand proposed changes in order to act on them. For example, a nursing home resident may choose to transfer to a different home if they had a bad experience with an incoming licensee.
Notice is typically a straightforward “check-the-box” in a health care transaction. However, parties to a transaction should understand that, though straightforward, notice is critically important, especially because a lack of sufficient notice can delay a desired closing date. Checking notice requirements should always be one of the first steps taken when transaction discussions begin.
For more information, please contact Hedy S. Rubinger or Alexander B. Foster.