New Connecticut Law Requires Disclosure of Certain Transactions Involving Group Medical Practices, Amends the CON Law, and More

Governor Malloy signed Public Act 14-168 into law this week, imposing new disclosure requirements on group medical practices that enter into certain transactions with hospitals or other group practices. The new law also amends the certificate of need and medical foundations laws and adds new requirements for hospital staff with respect to admitted patients.

Highlights of the new legislation include:

New Notification Requirements for Group Practices (effective October 1, 2014)

  • Parties to a transaction that involves a “material change” to the business or corporate structure of a group practice (defined to include 2 or more physicians) must submit written notice to the state Attorney General of such change at least 30 days prior to the effective date of the transaction. Generally, a “material change” is entering into a merger, consolidation, affiliation, equity or asset purchase with a hospital, medical foundation or similar hospital-controlled entity or with another group practice that results in a group practice of eight or more physicians.
  • Beginning not later than December 31, 2014, hospitals, hospital systems and group practices of 30 or more physicians must file annual reports with the state Attorney General and the Connecticut Department of Public Health.  The law specifies what information the notice must contain, including: (i) the names and specialties of each physician practicing medicine with the group practice; (ii) the names of the business entities that provide services as part of the group practice; and (iii) a description of the services provided at each location.
  • Parties to a merger, acquisition or other transaction that is subject to federal antitrust review under the Hart-Scott-Rodino (HSR) Act and that involves a hospital, hospital system or other health care provider, must notify the state Attorney General of the HSR filing, and provide a copy of the filing information upon the request of the Attorney General.

Changes to the Certificate of Need Law (effective July 1, 2014)

  • The new law requires a certificate of need (CON) for the transfer of ownership of a group practice (defined here to mean a practice of 8 or more full-time equivalent physicians) to any entity other than a physician or group of physicians. There is an exception for parties who have signed an agreement to transfer ownership on or before September 1, 2014.
  • Two new guidelines are added to the list of considerations the Office of Health Care Access (OHCA) must take into account when deliberating on a CON application, namely: (1) whether the applicant has satisfactorily demonstrated that the proposal will not negatively impact the diversity of health care providers and patient choice in the geographic region; and (2) whether the applicant has satisfactorily demonstrated that any consolidation of market share resulting from the proposal will not adversely affect health care costs or accessibility to care.
  • The law also adds new provisions that establish an expedited review period and a presumption in favor of approving a CON application for a transfer of ownership of a group practice when an offer was made in response to a request for proposal or similar voluntary offer for sale.

Additional Changes Effected by P.A. 14-168 (See below for effective dates)

  • The hospital conversion statutes (CGS §19a-486a et seq.) have been amended, requiring a for-profit purchaser of a nonprofit hospital to hold a hearing on the contents of its CON determination letter, and giving the state Attorney General and Commissioner of Public Health express authority to place conditions on approval of the sale. This provision is effective from passage, June 3, 2014.

 

  • The law amends the medical foundations statutes (CGS §§33-182aa- 33-182ff) to, among other things, define “hospital” and “health system” to include for-profit entities; revise the requirements regarding who may be a member of a medical foundation; and require medical foundations to provide an annual statement to OHCA, which OHCA will make public.  Also, the new law provides that hospitals, health systems and medical schools may not organize and be a member of more than one medical foundation.  This provision is also effective from passage.

 

  • Finally, effective October 1, 2014, hospital personnel must ask a patient if he or she desires to have his or her physician notified of the hospital admission, and if so, hospital personnel must make reasonable efforts to notify the physician as soon as practicable but not later than 24 hours after the patient’s request.