At the California Health Care Access and Information (HCAI) Affordability Board meeting earlier this week, members discussed new protocols healthcare entities engaging in transactions must take, including the potential for a cost and market impact review (CMIR).
Regulatory changes will go into effect on Jan. 1st, 2024, and fall under Senate Bill 184, which was passed last year. Healthcare entities entering a transaction, such as the sale or transfer of power, must file a material change notice (MCN) with the Office of Health Care Affordability (OHCA). Healthcare entities include payers, providers, fully integrated delivery systems, pharmacy benefit managers, and management service organizations.
“We do recognize that in many of these transactions, it may not be the healthcare entities as we traditionally think of them, but could be a related entity that controls or is controlled by the healthcare entity.”
— Sheila Tatayon, assistant deputy director of OHCA
Healthcare entities must submit an MCN if they meet certain threshold requirements, like having an annual revenue of at least $25 million or owning or controlling Californian assets of at least $25 million. Additional thresholds include having an annual revenue of at least $10 million, or owning or controlling Californian assets of at least $10 million while being involved in a transaction with any healthcare entity that satisfies the $25 million threshold. Healthcare entities located in or serving at least 50 percent of patients that reside in a health professional shortage area will also be subject to submitting an MCN.
Transaction circumstances may also trigger an MCN filing requirement if the transaction is likely to increase the annual revenue of any healthcare entity by at least $10 million, or 20 percent of its annual revenue. Other transaction circumstances include the sale, lease transfer, exchange, option, encumbrance, or disposition of 20 percent (or more) of assets of any healthcare entity.
In order to submit paperwork, healthcare entities must register for the electronic portal—which is under development— provide general information about other healthcare entities involved in the transaction, and respond to questions. The submission must include a description of the transaction and its necessity, impacts on the public, and benefits, among others.
“When healthcare entities submit their material change notice, it is under penalty of perjury,” Tatayon said.
Following the submission, OHCA will have 60 days to determine if a transaction must undergo a CMIR, and will notify the healthcare entities, who in turn, may request a review. OHCA will then post the MCN and supporting documentation to its website and begin a CMIR. Public comment will be open for ten business days to gather input on the preliminary report, and OHCA will issue a final report for CMIR within 30 days of comments being closed. Healthcare entities may then implement the transaction 60 days after the final report.
“We’re looking at current healthcare services provided and the post-transaction impacts … we have listed out some items in terms of behavioral healthcare, reproductive services, [and] LGBTQ+ services also.”
— Tatayon
The CMIR will assess issues relating to the business of the healthcare entities, including changes in size and market share in a service or geographic region, prices for services when compared to other providers for the same services, quality, equity, cost, and access.
The CMIR will also study the transaction’s effect on the availability or accessibility of healthcare services for the community, and the decreased competition or creation of a monopoly, which may lead to price hikes, less quality or equity, access restriction, and less innovation.