Health Law alert by Lamb McErlane attorneys Vasilios J. Kalogredis, Esq. and Sonal Parekh, Esq.

On April 17, 2024, House Bill 2012 (“HB 2012”) was presented, as amended, to the Pennsylvania House of Representatives. First introduced on February 5, 2024, HB 2012, if passed and signed into law, will represent and create the first state specific antitrust statute for Pennsylvania. HB 2012 was introduced with the expressed purpose of promoting free enterprise and trade by prohibiting restraints of trade that are secured through “monopolistic practices” and that act or tend to act to decrease competition in Pennsylvania.

Specifically, HB 2012 makes unlawful several acts relating to a restraint on trade or commerce. First, HB 2012 makes unlawful a contract, a combination in the form of trust or otherwise, or a conspiracy in restraint of trade or commerce. Second, HB 2012 provides that it is unlawful for a person to monopolize or monopsonize (or to attempt or conspire to monopolize or monopsonize) any part of trade or commerce. Third, HB 2012 provides that it shall be unlawful for a person to acquire, directly or indirectly, the whole or any part of the stock, share capital, or other equity interest of (or the assets of) another person if the effect is (i) to substantially lessen competition or (ii) to create a monopoly or monopsony of any part of trade or commerce. Last, HB 2012 generally makes it unlawful for any person(s) with market power in the conduct of any business, trade or commerce in a labor market, or in the furnishing of a service in the Commonwealth, to abuse that market power.

Though an individual or entity that has suffered damages as a result of a violation of the aforementioned prohibited acts shall have standing to commence an action, action shall be enforced by the Attorney General in the name of the Commonwealth, whether or not on behalf of a natural person injured by such violation. The prevailing party in an action brought under this bill (if passed) shall recover treble damages sustained, reasonable attorney fees and costs, expert witness fees, and investigative costs. Damages for injuries shall further include interest computed from the date of injury.

HB 2012 further imposes a notification requirement in relation to a health care transaction. Those persons required to file a notification and report form for certain mergers and acquisitions under the Hart-Scott-Rodino Act, shall be required to provide the same notice and documentation to the Office of Attorney General. HB 2012 supplements this by requiring written notice to the Office of Attorney General of health care transactions resulting in a material change not reportable under the reporting thresholds of the Hart-Scott-Rodino Act not less than 120 days prior to the effective date of such transaction. A “material change” includes a merger, acquisition or contracting affiliation between two or more of the following entity types: health care facilities, health care facility systems[1], or provider organizations[2]. HB 2012 explicitly includes within the definition of a material change, proposed changes between a Pennsylvania entity and an out-of-state entity where the out-of-state entity generates at least ten million dollars in health care services revenue from patients residing in Pennsylvania (where both entities are of the type previously identified). It is important to note that such health care transaction would only qualify as a material change if the parties did not already have common ownership or a contracting affiliation. The penalty for noncompliance with the notification requirement shall be a civil penalty of not more than $200 per day for each day of noncompliance.

To ensure compliance and prevent chances of violation of its provisions, HB 2012 imposes criminal penalties in the form of a felony of the third degree and a sentence of imprisonment of not more than four years or a fine of not more than one million dollars, or both. Accordingly, health care entities should be sure to double check the status of this bill as well as other requirements imposed before considering entering into a transaction that results in a material change.

The provisions of HB 2012 shall not apply to a cooperative association or an employee-owned enterprise, corporate or otherwise, of farmers, gardeners or dairy producers, including livestock farms and fruit growers, nor a contract, agreement or arrangement made by the association or enterprise, nor to a bona fide labor union.

Between the provisions of this antitrust bill, the ban on non-competes by the Federal Trade Commission, and the proposed ban on non-competes pursuant to HB 1633, it will be interesting to see how things unfold as it relates to a restraint on competition in the Commonwealth. Stay tuned for more updates!

If you have any questions regarding notification requirements, non-competes, compliance, or other health law matters, contact Bill Kalogredis, Esq. or Sonal Parekh, Esq.

[1] A health care facility system is defined as either (i) a parent corporation of one or more health care facilities and an entity affiliated with the parent corporation through ownership or control; or (ii) a health care facility and an entity affiliated with the health care facility through ownership.

[2] A provider organization is defined as a corporation, partnership, business trust, association or organized group of persons whether incorporated or not, that is in the business of health care delivery or management and that represents two or more health care practitioner sin contracting with insurers or third-party administrators for the payments of health care services. The term includes a physician organization, physician-hospital organization, independent practice association, provider network and accountable care organization.

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Vasilios J. (Bill) Kalogredis, Esq. has been advising physicians, dentists, and other healthcare professionals and their businesses as to contractual, regulatory and transactional matters for 50 years. He is Chairman of Lamb McErlane PC’s Health Law Department. Bill can be reached by email at bkalogredis@lambmcerlane.com or by phone at 610-701-4402.

Sonal Parekh, Esq., is an associate at Lamb McErlane PC who focuses on healthcare transactional matters and a broad range of healthcare regulatory-related issues on behalf of healthcare systems, physicians, dentists, and other healthcare providers, and is a pharmacist by education and training. Sonal can be reached by email at sparekh@lambmcerlane.com or by phone at 610-701-4416.

*This alert is for educational purposes only and is not intended to be legal advice. Should you require legal advice on this topic or have any questions or concerns, please contact Vasilios J. (Bill) Kalogredis, Esq. or Sonal Parekh, Esq.