Co-authored by: Garrett Reinhart, Law Clerk
As 2023 begins, we are tracking several key legal and regulatory issues that are sure to impact the health care industry in North and South Carolina in the coming year.
1. Consolidation among health care providers
Consolidation of health care providers through mergers and acquisition activity is expected to rebound in 2023 from slightly lower numbers in 2022 which were a result of a lingering impact from COVID-19 and slow-downs and uncertainties in the economy. While the number of transactions slowed in 2021 and 2022, deal values in the Carolinas remained strong with both MUSC and Atrium making large plays which increased their operations.
The markets are still reacting to MUSC's $75 million purchase of KershawHealth and Providence Health from Tennessee-based company LifePoint Health in 2021.1 The deal included three hospitals, one freestanding emergency room center, and all affiliated physician practice locations throughout the Midlands of South Carolina.
On December 2, 2022, Atrium Health and Advocate Aurora Health confirmed a $27 billion merger deal, creating a 67-hospital system to be named Advocate Health and headquartered in Charlotte.2 Atrium Health will continue to operate under the Atrium Health brand in the Carolinas. The impact of this very large transaction remains to be seen as Atrium Health was already one of the largest health systems in the Carolinas.
Looking forward, major deals are already being announced in the southeast for 2023. In Georgia, Augusta University Health System, the Medical College of Georgia at Augusta University, and Wellstar Health System have signed a letter of intent to begin the process of creating a statewide health system. The deal is set to provide key investment into existing facilities and provide funding for a new hospital and office space in Columbia County.3
We are currently following several other health system consolidations in the Carolinas that will likely be announced sometime in 2023.
In the Carolinas, we expect to see the continued trend of acquisition of independent physician practices by health systems on private equity buyers. While many, if not most, independent practices have already been acquired by health systems or other entities, there are still potential buyers looking to acquire independent practices. Independent physician practice ownership continues to be the minority structure for physician practices in the Carolinas. It has been reported that 70% of physicians in the U.S. are employed by hospitals, health systems, or other corporate entities.4 Market-wide projections for the coming year expect transaction activity to trend back toward 2021 highs with divestiture deals and physician practice acquisitions once again driving up total transaction values.5 We may also expect to see some limited examples of physician practices spinning out of hospital or health system ownerships back into independent practice status.
2. Continued tend towards transparency and impact on the market
Following the federal rule requiring hospitals to publicly disclose the rates that they charge for their services and other information, we saw the first public fine for enforcement of these rules.6 On June 7, 2022, CMS imposed civil monetary penalties of $1 million collectively on two Georgia hospitals for failure to comply with hospital price transparency rules.7 These substantial penalties serve as some of the first examples that the federal government is serious about the enforcement of the federal transparency rules and that the trend of price transparency will continue from a federal regulatory perspective. As a result of the increased penalties and these fines, hospitals are taking a closer look at their compliance with these rules. There has not yet been any enforcement on insurance companies that had similar transparency rules imposed on them in 2022.
To avoid similar penalties in the coming year, it is crucial that health care providers seek advice on what is required of them under another transparency-related initiative, the No Surprises Act. The No...
