Cross-sector deals promising healthcare transformation are keeping lawyers hustling in 2018.
Healthcare lawyers tout surge in care transactions as transformational
While the proposed merger of CVS Health and Aetna is in the spotlight, attorneys at the largest healthcare law firms are busy handling numerous transactions involving hospitals, physicians, insurers, pharmaceutical companies, private equity firms, post-acute providers and IT companies.
That's changed from the immediate post-Affordable Care Act period, when much of the health legal work involved implementation and regulatory issues flowing from the new law.
Not surprisingly, the current mantra is value-based care, with dealmakers touting the potential for greater patient convenience, reduced costs and better health outcomes.
“Now you're seeing the unleashing of innovative delivery systems responding to payers that want to get more for an episode of care,” said Nancy Taylor, co-chair of the health practice at Greenberg Traurig.
Whether and how these deals actually translate into better care and lower healthcare spending is left a little vague by the lawyers handling them. Some observers are skeptical of such claims.
“There are two ways to create value,” said Fiona Scott Morton, a Yale University economics professor who previously served in the Justice Department's antitrust division. “One is to create better products that benefit consumers, and the other is creating market power that allows firms to raise prices. They don't say which of those two they have in mind.”
Many deals are underway to organize the fragmented post-acute care sector into a more efficient, coordinated system. That's motivated by hospitals increasingly being held financially accountable for entire episodes of care, including what happens after discharge, said Mark Lutes, board chair at Epstein Becker & Green.
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There's also a large amount of private equity activity in acquiring and organizing networks of physician specialists. The capital should enable doctors to build better delivery models and expand their footprints, said Aytan Dahukey, a partner at Sheppard Mullin, which is working on physician group deals with H.I.G. Capital, General Atlantic, and other venture capital firms.
Investors are also looking for ways to create scale and brand in behavioral health and addiction services, according to Lutes.
“You're seeing transformational collaboration among multiple players whom no one 15 years ago would have expected to come together looking for improvements,” said Stephen Bernstein, global head of the health practice at McDermott Will & Emery. His firm is advising CVS in the Aetna merger.
Meanwhile, hospital mergers have slowed for now, though notable proposed tie-ups such Catholic Health Initiatives-Dignity Health and HCA-Mission Health are pending.
“There certainly are some major courtships and what Wall Street would call tuck-ins, but the middle market for hospitals and health systems is a bit quiet right now,” said Dick Cowart, chair of Baker Ober Health Law within Baker Donelson, which ranked 6th on the MH list, with 206 lawyers.
Looking ahead, federal political and policy changes could either fuel or chill dealmaking.
The CMS is seeking public comment on how it could relax the Stark anti-kickback laws to facilitate value-based payment arrangements. If rules are loosened, that could open the door to more consolidation and collaboration among providers, Taylor said.
Another factor investors are watching is the policy environment around healthcare reimbursement rates, including Medicare and Medicaid. If Republicans retain control of Congress this November, there will likely be a push to restructure and cut Medicaid and other entitlements. Then the outlook for dealmaking could change.
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