In an effort to tackle rising health care costs, California established the Office of Health Care Affordability (OHCA) through new legislation passed last year. The OHCA is tasked with collecting and analyzing data related to health care costs and has the authority to review mergers and acquisitions within the health care industry to monitor their potential impact on costs.
Starting January 1, 2024, new notice and review requirements will be implemented by the OHCA for transactions that close on or after April 1, 2024. Health Care Entities, which are defined under the law and its regulations, are now obligated to provide written notice to the OHCA if they plan to sell, lease, transfer, or otherwise dispose of a significant portion of their assets or transfer control of operations to other entities. This notice must be given at least ninety (90) days prior to entering into the agreement or transaction.
Once the OHCA receives the notice, it has sixty (60) days to conduct a cost and market impact review of the proposed transaction or waive the review. If the OHCA determines that the transaction poses a risk of significant impact on market competition, it must conduct a thorough review. The implementation of a covered transaction cannot take place until sixty (60) days after the OHCA issues a final report, unless the review is waived.
Recent revisions to the proposed regulations have clarified that Management Service Organizations (MSOs) are not considered Health Care Entities under the revised regulations. However, MSOs may still be subject to notice requirements if they fall under the control or financial responsibility of a Health Care Entity. Other entities that perform the functions of a Health Care Entity may also be deemed Health Care Entities if they are under the control, governance, or financial control of a Health Care Entity.
Overall, the establishment of the OHCA and the introduction of these new regulations aim to increase oversight and control in the health care industry in California to mitigate rising costs and ensure affordable access to quality care for residents.
**FAQ**
What is the Office of Health Care Affordability (OHCA)?
-OHCA is an entity created by California to collect and analyze data on health care costs and oversee mergers and acquisitions in the health care industry. Its role is to monitor the potential impact on health care costs and ensure affordable access.
What are the notice and review requirements under the new regulations?
-Health Care Entities are required to provide written notice to the OHCA if they plan to sell or transfer a significant amount of assets or transfer control of operations. This notice must be given at least ninety (90) days prior to the transaction. The OHCA then has sixty (60) days to conduct a cost and market impact review or waive the review.
What happens if the OHCA determines that a proposed transaction poses a risk of significant impact on market competition?
-In such cases, the OHCA must conduct a thorough cost and market impact review. The implementation of the transaction is prevented until sixty (60) days after the OHCA issues a final report, unless the review is waived.
What are the recent revisions to the proposed regulations?
-Management Service Organizations (MSOs) have been removed from the definition of Health Care Entities under the revised regulations. However, they may still be subject to notice requirements if they fall under the control or financial responsibility of a Health Care Entity.