The Strategic Planning Committee should be made aware of three important legal developments arising in October that may have direct implications on the organization's strategic plans with respect to physician integration and M&A activity.

The first of these developments is the October 14, 2016, release by CMS of its highly anticipated final rules under MACRA, which establish the new Medicare payment methodology for physician services furnished under Medicare Part B, known as the Quality Payment Program (QPP), and will be effective beginning January 1, 2017. While this new methodology applies to payments beginning in CY 2019, reporting for the first year of the QPP begins in 2017.

The second development is the October 27 speech by the FTC’s Bureau of Competition Director on hospital acquisitions of physician groups. The FTC has traditionally focused on hospitals’ acquisitions of other hospitals or physician group acquisitions of other physician groups, both types of combinations being of “horizontal” competitors.  But, in this new speech, the FTC is now signaling that it will take a greater interest in “vertical” combinations of different types of providers, such as acquisitions of physician groups by hospitals.

The third development is the October 31 decision of the Seventh Circuit Court of Appeals, overturning a prior district court decision against the  FTC in the Advocate/North Shore merger case. The Seventh Circuit ruled that the District Court had committed clear error in how it defined the geographic market in which to analyze proposed merger's impact and remanded the case back to the District Court. This ruling is another victory for the FTC's hospital merger enforcement program and, together with its recent appellate victory in the Penn State Hershey case, is a strong endorsement for the FTC's focus on narrow geographic markets.

Corporate Law and Governance Update

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