CHAPA and CERTIFICATE OF NEED TIMELINE
- The timeline gives a visual to the process for both the CN and CHAPA – processes are similar in terms of what documentation the hospitals must provide.
- Exempted from the CN are mergers between two non-profit systems where this no purchase or sale of assets – if the merger is between a non-profit and a for-profit, then it must go through the CN process.
- There is a voluntary opportunity for two merging non-profits to submit to the CN process, and some have actually done that: Atlantic Health when it took over Chilton Hospital and DOH placed 19 conditions on the deal to protect patient care, access to care, and employee workplace rights.
- CHAPA governs non-profit hospital transfers that result in an acquisition – if the merger is occurring between a for-profit to non-profit system, it would not be subject to CHAPA, but it would be subject to the CN.
- It all starts with two entities talking with each other and then deciding to merge.
- An Asset Purchase Agreement, Letter of Intent, Membership Transfer Agreement, or Definitive Agreement is written and submitted to the Attorney General and/or the Department of Health.
- Under the CHAPA process the hospital being acquired must advertise the proposed acquisition in the local paper once per week for 3 consecutive weeks.
- At least one hearing must be conducted for the public – if a CN is happening at the same time as the CHAPA, the DOH and the AG’s office will often conduct a joint hearing. If it is just a CHAPA process, a representative from the DOH will be present at the CHAPA hearing.
- The biggest difference between the two processes is that with the CN the DOH is able to set conditions that the controlling partner must abide by and will be subject to DOH oversight. These conditions often include a set minimum number of years remaining a general hospital; maintaining services, sometimes specifically delineated such as maternity or dialysis; retaining staff; offering substantially equivalent or better health insurance to staff; maintaining insurance participation for in-network care for a specified period; and continuing compliance with charity care requirements.
- The Attorney General’s office will make recommendations that will go to the Superior Court Judge for consideration, and will include any recommendations made by the public at the hearing that it deems valid.
- Both processes go before the NJ Superior Court for a final decision for approval.
RE: ENGLEWOOD AND NON-PROFIT ENTITY v. FOR-PROFIT MERGER
- Since Hackensack Meridian Health as the acquiring party is a non-profit hospital system, the merger with Englewood, also a non-profit, will not be subject to the Certificate of Need process through the Department of Health, but it will have to go through the Community Health Assets Protection Act process conducted by the NJ attorney General’s office.
- If the acquiring party was a for-profit then the merger would go through the Certificate of Need process and the CHAPA process.
- The first public announcement was made through a press release to the news media.
- A Letter of Intent will be filed with the Attorney General’s office as part of the CHAPA application process.
- That document will contain conditions and agreements already decided between the two parties such as capital commitment made by the acquiring party, commitment to maintain the acquired facility as an acute care hospital for a certain number of years (5-10 usually), commitment to maintain all services either indefinitely or for a specific period of time, and maintaining current staff who are in good standing.
- Once that document is in the hands of the AG and/or DOH, the AG or DOH will send the acquired party a list of questions, upwards of 40, to complete with detailed answers. They will look over Board of Director minutes for the previous three years, audited financial statements for three years, they will ask for any independent reviewer’s take on the value of the acquired hospital, by-laws from both facilities, before and after hierarchical charts, and more. Tens of thousands of pages of documents will be submitted to the AG and/or DOH.
- If there are any gaps in the responses, the AG will send out a request for more responses asking for greater detail.
- The merging parties will be asked to list the community benefits and those frequently include things such as: access to more care options; greater efficiencies like integrated electronic health records; increased positive quality and outcomes; convenient access to providers; continuous care for vulnerable and underserved populations; continuation of ambulatory services; and community based health, wellness, and educational services.
- The plan for the capital commitment, the amount of money the acquirer plans to invest in the acquire over a certain time period (usually within the first 5 years) and what that money will be spent on, whether infrastructure, IT improvements, or expanding and/or updating a particular department.
- There may be one particular department that is a money maker or that the acquired hospital is known for, and that will often be a target for improvement, updating, enlarging.
PUBLIC HEARING and SUPERIOR COURT APPROVAL
- DOH and the AG’s office are both required to conduct a public hearing, giving all concerned parties an opportunity to make a public statement regarding the proposed merger. Any concerns or recommendations made by the public that DOH or AG believe to be valid will be included in the recommendations sent to Superior Court of NJ. The State Health Planning Board, under the aegis of the DOH, conduct the CN hearings.
- Historically, HPAE always testifies at the public hearings, usually an officer from the local that is affected by the merger.
- After the hearing the AG’s office and/or DOH will send their analysis/recommendations/conditions to the Superior Court for final approval of the transaction. Depending on how soon the AC or DOH office have their reports for the courts ready, the Judge can make a decision within a few days after the hearing or it can take a few weeks.
FTC AND MARKET SHARE
- Depending on who acquires Englewood, there could be some kind of FTC investigation. When a merger exceeds the current HSR threshold, which determines whether the value of the merger is large enough to require pre-merger notification to the Federal Trade Commission, the FTC then has a way to track the merger.
- For example, Virtua and Lourdes combined will make for a 55% market share in an approximately twenty-mile radius, based on 2018 utilization data. This has triggered a filing of an antitrust investigation with the FTC as the new Virtua system will capture more than half of all patient care in the area.
- The FTC is generally interested in whether the merger will cause a lack of competition and if it will cause health insurance rates to rise.
- To measure the health insurance costs, they look at the five largest employers in the area to see if there is a concern that employer insurance costs will increase.
- If the FTC finds grounds for an anti-trust case, they will file a lawsuit
- The market share map shows the locations of all the HMH hospitals and Englewood.
- All of the hospitals are under 10 miles from Englewood except for Mountainside (21 miles from Englewood).
- Due to the size of HMH, it could trigger an investigation because it will be adding to the scope and reach of HMH in the state.
UNION DENSITY AND SUCCESOR LANGUAGE
- Right now you have 100% union density among the 700 nurses at Englewood.
- With this merger, Englewood is joining the four HPAE locals already part of the system. This would make for approximately 3000 HPAE members under the HMH roof.
- HMH has 34,000 employees so this would make for 9% union density among.
- Englwood has successor language in its current contract:
- SUCCESSORSHIP In the event of a total acquisition of the Medical Center, to the extent legally permissible, the terms and provisions of this agreement shall be binding upon the parties hereto, their heirs, executors, administrators, assignees purchasers and successors. The hospital shall make best efforts to notify the union at least forty-eight (48) hours prior to the public announcement of such an agreement.