Ohio Health Lawyer & Attorney : Jayne Juvan : Benesch Friedlander Law Firm : Serving Columbus, Cleveland, Cincinnati, Toledo, Akron, Dayton, Parma, Youngstown, Canton, and Lorain OH

The April 2008 issue of the Health Care M&A Monthly (subscription only publication) reports the announcement of 219 health care transactions in Q1 2008, down from the activity in both Q4 2007 (301 deals, down 27%) and Q1 2007 (237 deals, down 8%).  Biotechnology, pharmaceutical and medical device deals account for almost 75% of the deals announced, while home health, managed care, hospitals, long term care and behavioral health transactions collectively accounted for only about 8% of the volume.  The authors recognize that the decline is due, at least in part, to the credit crunch and the fact that activities of financial buyers have slowed, but point out that health care tends to be anti-cyclic and that the industry is still very much in need of consolidation.  Make sure to check out the full report for additional analysis on these and other industry trends.  For those who closely follow HC M&A activity, you may want to consider a subscription to this publication, as I have found the analysis to be very good.

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The Healthcare Dealmaking Symposium recently held by The Deal in New York City offered great insight into 2008 M & A trends in the health care space. One of my colleagues was in attendance and provided me with a brief overview of the major themes from event.  For those of you following health care M & A trends who couldn't attend, I would encourage you to check out online coverage of the event, as The Deal includes top notch video footage clips of several of the lead presentations. 

I'm sure it will come as no surprise, but the collapse of the credit markets seemed to take center stage.  An article from The Deal's web site entitled Healthcare Dealmaking Symposium: 12 Month Outlook quotes Russell L. Carson, co-founder of Welsh Carson, Anderson & Stowe, who summed up investor sentiment when he stated, "I don't think we want to do anything today that's reliant on capital markets to close.  There won't be a lot of $5 billion-plus deals by private equity firms until the credit markets unfreeze, and I don't see that happening this year." 

Other deals may be slow to take off as buyers and sellers continue to find themselves at a pricing standstill.  Sellers still expect 10-12 x EBITDA, while buyers are looking for multiples in the range of 6 to 8. 

According to panelists, strategic buyers with a lot of cash on hand are well positioned, followed by PEs and SPACs.  The hottest space in health care will likely be pharma, med tech, diagnostics, biotech and companies that focus on cost-containment. 

I'll be in attendance at the conference sponsored by iiBig at the end of the month entitled Investment and M & A Opportunities in Healthcare: Generating BIG Returns in a Fast-Growing Sector and will provide coverage of the trends highlighted at the conference.   For those of my readers who will also be in attendance, I look forward to seeing you there!

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On Monday, the United States Department of Justice ("DOJ") announced that it reached a settlement with the State of New Mexico in response to allegations that the Ft. Bayard Medical Center and Nursing Home, a state owned nursing home located in Bayard, New Mexico, violated the civil rights of several of its residents.  This month, the DOJ also announced a settlement with a pharmaceutical company, a wheelchair supplier and a hospital in the District of Columbia. 

Continue Reading...

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Last week, I visited Orlando, Florida for the American Health Lawyers Association Long Term Care in the Law Conference.  This week's Health Law Recap will focus on a few themes and trends identified at the Conference. 

• Shift in Long Term Care Reimbursement.  Leslie Norwalk, the Acting Administrator for the Centers for Medicare and Medicaid Services (CMS), focused on the increased pressure on the federal government resulting from the health financing crisis.  In response, federal reimbursement for long term care will shift in favor of home health agencies and away from skilled nursing facility care.
• Employee Education About False Claims Act.  Many attorneys expressed to representatives of CMS that there continues to be substantial and noteworthy ambiguities in connection with the Deficit Reduction Act employee education requirements.  One attorney noted that the requirement applies to an entity that has less than 5 million dollars in Medicaid payments if the entity is affiliated with other entities that receive 5 million or more in such payments.  Representatives for CMS have promised that further clarification will follow shortly.
• Plaintiffs' Lawyers Use Web Sites, E-Mail Addresses to Pierce the Corporate Veil.  There has been a strong trend for parent companies who acquire nursing home facilities to form separate subsidiaries to act as holding companies and operating companies for each nursing facility acquired.  One prominent defense attorney noted that plaintiffs' lawyers have begun to cite to web sites and e-mail addresses to build a case for veil piercing.  The lawyer cautioned that employees in each separate company should have different e-mail addresses. For example, if the parent company is named "Health Care Solutions, Inc.," one subsidiary is named "Brecksville Health Care Solutions, Inc."  and the other is "Madison Health Care Solutions, Inc.," the employees at the parent and both subs should not have their e-mail address as "employeename@healthcaresolutions.com."  Instead, the following e-mail addresses would help to show that the three entities are separate legal entities:
  • Parent Company:  employeename@healthcaresolutions.com
  • Brecksville Health Care Solutions, Inc:  employeename@brecksvillehealthcare.com
  • Madison Health Care Solutions, Inc:  employeename@madisonhealthcare.com

In addition, the attorney noted that legal counsel should review a company's web site and that the web site should clearly state that each facility is owned by a separate legal entity.

• Medicaid Fraud Enforcement Is on the Rise.  Many representatives of the federal government emphasized that, in the upcoming years, the government will have increased budgets to implement Medicaid fraud controls and pursue Medicaid fraud investigations.  In the past, Medicaid has not received the same scrutiny as have other federal health care programs. 

 

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Merck & Co., Inc., vowing to fight individually each of the 24,000 suits against it alleging that the company failed to adequately warn consumers about the harmful side effects of Vioxx, an arthritis drug, and that Vioxx caused heart attacks, received a favorable verdict from a New Orleans jury today.  Vehemently opposing the claim that Vioxx caused Charles Mason's heart attack, attorneys for Merck argued that Merck complied with all reporting obligations and that other health factors were at the root of the cause of Mason's condition.  Phil Beck, an attorney for Merck, reflected on the victory, stating, "We thought the evidence showed clearly that first, Mr. Mason had not taken Vioxx for several days before his heart attack, and second, that there was no (blood) clot that could have come from Vioxx."

Thus far, Merck has successfully won seven out of eleven cases that have gone to trial, though in one the court ordered a new trial because additional evidence subsequently surfaced.  The Dean of Williams University School of Law David Logan has speculated that Merck will allow several more suits to go forward before deciding whether to settle with plaintiffs collectively.

News of the verdict hit before the NYSE closed.  Merck finished off the day at 44.15, up slightly, but still down from the 52 week high of 46.37.

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